CBRE's mid-year New Zealand Investment MarketView research report reveals that institutions are making a comeback with a strong net fund accumulation drive.
Although the number of sales decreased from H2 2018 levels, the total value of transactions was on par with H2 2018 result.
The report details that:
• Auckland sales increased while Wellington and Christchurch experienced a slight dip
• Net investment activity was dominated by institutions, with the largest three transactions over $100 million, all purchased by overseas investors.
• 39 percent ($740 million) of the sales volumes related to office assets. Industrial sales followed at 22 percent ($419 million) and retail sales contributed 14 percent ($268 million) by sales volume. The market also saw a number of development site sales totalling 10 percent ($179 million) of sales volume.
In Auckland, there were 54 sales totalling $1.4 billion, 76 percent of the total volumes nationally. This was made up of six transactions above $50 million including the sale of 155 Fanshawe St for $247 million by Mansons, followed by the sale of Sky City Carpark for $220 million to the Macquarie Bank and Chorus House for $145 million to Invesco.
In Wellington, there were 14 transactions over $5 million totalling $255 million. The largest was Mataurangi House at 33 Bowen St selling for $82 million by an Australian private investor to an international private syndicate. This was followed by the sale of AMP Society Building at 86 Customhouse Quay for $33 million.
In Christchurch, there were 8 transactions totalling $208 million. The largest sale involved Northwood Supa Centa at 1 Radcliffe Road, sold for $81.7 million by a Canadian managed fund to a local private investor. This was followed by the sale of EntX Christchurch Entertainment Central at 617 Colombo Street for $49 million by a local private developer.
The report highlights that overseas investors injected $741 million into the New Zealand property market in the first half of 2019 and sold $212 million worth of property. The most active purchasers were from Asia, Australia, USA, Canada, Germany and Hong Kong with net flow of funds particularly from Asia Pacific strongly positive.
Private investors showed strong presence in H1 2019 with 66 percent of the transaction volume attributed to these buyers. Corporations, institutions and syndicates were more inclined to sell than to buy in H1 2019 with vendor activity outweighing their purchase activity.
The report also looked at the net investment position on an annual basis for each of the investor groups. Historically, institutions became the main accumulating player until the GFC in 2008. For the next 5 to 6 years institutional investors became the main sellers of property with NZ based private investors making most of the acquisitions Since 2013 institutions alternated from net fund accumulation to net selling, with the current result showing a strong net accumulation. Over the last ten years, institutional net transaction activity resulted in divestment of $349 million. Since 2016, institutions clearly have been accumulating properties disposed of by privates.
Brent McGregor, executive chairman of CBRE, cited the ongoing strong liquidity levels, increasing average deal sizes and the continued level of interest in NZ, by off shore buyers as key features of the market.
"The last 20 sales campaigns run by the CBRE Capital markets team has seen a total of 118 bids and a bid value of $9.4 billion. We are still seeing on average around six bids per campaign and upwards of 10 bids for sought after industrial and office stock," he says.
Zoltan Moricz, senior director of research for CBRE New Zealand, says that while the number of sales across New Zealand was modest compared to the previous six months the total value transacted was comparable. "This indicates that average deal sizes are up.".
"The trend reflects the willingness of existing owners of larger assets to sell given the current sharp yields and the elevated level of both onshore and offshore buyer appetite for these types of property. A seasonal element may also be at play. Being the first half of the year, which is traditionally weaker, it provides a good basis for a strong annual result and there are plenty of new opportunities coming into the market for the last half of the year."