Offshore investors renew interest

Bayley's Real Estate is stepping up its offshore marketing activity in response to increasing international interest in New Zealand commercial and industrial property, particularly out of Southeast Asia.

David Bayley, the company's executive director, and senior broker James Chan have recently returned from visits to Singapore and Hong Kong, respectively, marketing a selection of substantial New Zealand commercial properties. They have also re-established contact with several long-standing clients.

Bayleys is also putting together an Investment New Zealand portfolio of property to market in a number of offshore destinations. This will include a mix of higher-value New Zealand office, retail, industrial, coastal and rural offerings.

Bayley says the main focus of the company's marketing activity this year is in Southeast Asia and particularly Singapore, Hong Kong and mainland China because this is where most international interest in New Zealand property is coming from.

Southeast Asians were significant investors in the New Zealand commercial and industrial property market in the 1990s but have been relatively inactive recently.

Bayley says their renewed interest can be attributed to a combination of factors.

"They are classic counter-cyclical investors and they perceive there are good opportunities in the New Zealand market. The falls in the value of the New Zealand dollar and in interest rates have also been factors, along with attractive property prices and yields," says Bayley.

"They also like the signals that are coming out at a political level from the new National Government, including a more welcoming overseas investment environment."

Chan says New Zealand is viewed as a "safe investment haven", providing a relatively stable market with less volatility than many other international property markets.

Hong Kong-born Chan has been with Bayleys more than 20 years and won the Bayleys 2008 Commercial Salesperson of the Year award. He has established a large database of both local and international Southeast Asian investors.

"Our Southeast Asian property-owning clients here, who also have investments in other countries, are generally happy with their New Zealand assets. I have one client who also has a lot of property investment in Europe who told me that values have fallen a lot more there than in New Zealand.

"Capital-value retention is important to them, and while New Zealand doesn't have the highs of other markets, it doesn't have the lows either. They see New Zealand as being less affected by global economic turmoil and not many are looking at selling their New Zealand property."

Chan says most Southeast Asian investors are high net worth individuals or private investment companies. He says about two-thirds are looking for passive investments, such as well located office or retail properties with strong tenant covenants.

The balance are more entrepreneurial, prepared to look at opportunities with more risk but also greater potential to add value.

Typical of the type of investment is a three-level character building in Victoria St, in Auckland's CBD, which Chan recently sold to a Chinese investor for $3.175 million at a 7.8 per cent yield.

The 266sq m building is leased to the ASB Bank until 2012, with rights of renewal through until 2024. Chan sold the building in conjunction with Richard Yang, of Bayleys Auckland Central, who was handling the sale on behalf of the Korean vendor.

Bayley and Chan are tipping mainland China as the big growth market over the next few years and the company will be focusing on increasing exposure of New Zealand property to high net worth individuals in Beijing and Shanghai.

Chan says the Chinese view New Zealand as a friendly and safe place in which to do business and the free trade agreement has been a major catalyst for increasing contact between the two countries.

Typical of the stronger links being established with China was this week's International Sustainable Cities Forum held in the Langham Hotel in Auckland.

Organised by the New Zealand Chinese Herald, it brought together government and corporate leaders from both China and New Zealand and was timed to coincide with the anniversary of the signing of the China-New Zealand Free Trade Agreement in April last year.

One of its purposes was to provide visiting Chinese entrepreneurs and investors with an opportunity to explore commercial and business opportunities in New Zealand as well as understand our approach to sustainable development.

The keynote speaker was Wang Shi, referred to by Time magazine as China's Donald Trump, founder and chairman of Vanke, one of the largest property developers in China.

Others present included Feng Lu, chairman of the Vantone Group, which has a US$2 billion portfolio of office towers, shopping malls, high-rise apartments and luxury villas in China, as well as several industry and local government leaders.

Prime Minister John Key is also visiting China later this month with a delegation of New Zealand business leaders. Key will be opening NZ Central in Shanghai.

Bayleys also works in conjunction with its international affiliate Cushman & Wakefield in global markets, and has a New Zealand display suite in its London office. However, David Bayley says regular personal visits to key markets are essential to maintaining and increasing New Zealand's profile and in securing sales.

"Offshore investors want personal contact with people who are working in a country they are considering investing in and who can give them the up-to-date market information and insights that they need.

"That's why we have always placed a lot of emphasis on regular visits to key offshore markets. It's no different from an exporter selling New Zealand goods offshore - you need to put the groundwork in to get the results."

The main challenge the agency faces, says Bayley, is securing sufficient good-quality property.