By Greg Ninness
The commercial property market remains buoyant with the three multinational commercial property agencies that publicly release their financial results reporting combined revenues of $187.2 million in the 12 months to December last year.
The biggest of these was Colliers International which reported total revenue of $113.9 million (excluding GST) from its New Zealand operations last year.
That includes commissions from the sale and leasing of properties, and fees charged for services such as valuations and property management.
Of that, $71.9m was earned by Colliers' directly-owned subsidiary in this country, which operates its Auckland business, and another $42 million came form its locally-owned franchised operations around the rest of the country.
CBRE had revenue of $46.1 million last year, up 6% compared to 2015, and JLL (formerly Jones Lang La Salle) had revenue of $27.2 million, almost unchanged from 2015 (see table below).
| 2015 | 2016 | |
| Colliers International | $68.7m | $71.9m |
| Colliers NZ Franchises | $39m | $42m |
| CBRE | $43.5m | $46.1m |
| JLL (including JLL Hotels) | $26.7m | $27.2m |
Colliers managing director Mark Synnott said the main challenge facing the company last year was how to hang on to the extraordinary level of growth it had achieved in 2015 when revenue grew 27% compared to the previous year.
"We were scratching our heads to see how we could go to $108 million again, but we did and we maintained profitability," he said.
Synnott said growth levelled off in the Auckland market last year and much of the company's increased business had come from its franchised offices around the country, with its Hamilton office having a particularly good year.
The stand out performer for Colliers last year was its Capital Markets unit that handles very large transactions, which generated twice as much revenue last year as it would in a normal year, Synnott said.
Deals the unit handled included the largest ever sale of a retail property transacted through a real estate agency in this country, Westfield's sale of its Chartwell and Queensgate malls for $450 million to Stride, and the largest ever sale of an office building transacted by an agent in this country, Goodman's sale of the Millennium Centre to property syndicator Oyster Group for $210 million, he said.
"One of those in a year would have been unusual, but to get two was extraordinary," he said.
High level of interest from overseas investors
This year is also shaping up as not too shabby, thanks to the high level of interest from overseas investors in New Zealand commercial properties.
"There is an absolutely unprecedented level of offshore buying interest," Synnott said.
"We've had more interest in the first five months of this year than we did in all of last year, and when I say interest, it's real transactions."
One such sale was The Warehouse retail premises at Newmarket in Auckland, sold for more than $100 million to a mainland Chinese investor who intended to eventually develop a mixed use residential/retail/office complex on the site.
Most of the buying interest was coming from the Asia-Pacific region, including Australia, because the yields in this country were relatively more attractive than those in larger markets.
"They are getting at least double the yield for a prime property [in New Zealand] than they would get in Hong Kong or Singapore and they can still borrow at reasonable rates offshore, so it all sort of works for them," Synnott said.
CBRE NZ managing director Brent McGregor also sees last year's buoyant commercial property market continuing this year.
"A good proportion of the growth came from our business lines that service corporate occupiers and with the robust economy continuing, the same themes are evident in 2017," he said.
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18 Comments
Good, sell it all. While these foreigners are here to choose which property they wish to outbid a Kiwi family on, they stop by to buy a coffee or a beer - thus creating jobs for domestic baristas and bartenders, lowering the unemployment rate of NZ.
It's funny how the National Party terms such purchases as Foreign Direct Investment- a measure that uses the positive connotation of a greenfield investment to misrepresent large proportions of unproductive real estate purchases.
First, they con their way into government and now they pawn everything off to the highest bidder.
>Good, sell it all. While these foreigners are here to choose which property they wish to outbid a Kiwi family on, they stop by to buy a coffee or a beer - thus creating jobs for domestic baristas and bartenders, lowering the unemployment rate of NZ.
Good point. Be encouraged, young Kiwis. There will always be servant jobs for your new masters.
Personally, I am quite happy to have the greatest fool to be a foreign speculator.
I watched this happen a quarter century ago with US property along with Japanese "investors" buying huge amounts of California and Hawaiian property. This did not end well for them, the elevated prices that they purchased ended up washing out and almost all of these high dollar purchases ended up being sold at much lower prices a few years later. This is not a bad thing, having foreigners buy at the peak and selling at lower prices later is a very good result for the local economy (as well as foreign trade). It does feel a bit painful when they appear to be buying the country at the time, which was very much the case for Hawaii and some parts of California around 1990. Too bad, so sad, the japanese bubble popped and the real estate rising sun ended up setting with a rather loud plop...
Yes, circumstances are a bit different now. My perspective is that I'm seeing a rather good rhyme, although it may not classify as a repeat.
Good point. The Japanese are traditionally conservative when it comes to investment. They also get spooked easily, Witness the strength of the yen during the GFC as capital flowed back to Japan. The Japanese crashed the Gold Coast property market I believe.
Most people don't really focus on human behavior with capital flight. They don't understand its relevance.
One such sale was The Warehouse retail premises at Newmarket in Auckland, sold for more than $100 million to a mainland Chinese investor who intended to eventually develop a mixed use residential/retail/office complex on the site.
The Warehouse is the NZ equivalent to Japan's Daiso and the U.S.' Dollar Tree (except that the prices are relatively more expensive in NZ). Those retail formats in Japan and the U.S. are the result of deflationary economic conditions and their impact on consumer spending.
The investor might be a visionary if he thinks that The Warehouse is the future. Not sure why office space and residential development would be part of that vision.
This is such a good point. Usually whenever you hear the government justifying ownership of land or business to foreign ownership, they will always counteract it with the statement that it will create jobs for nzers. But wouldn't we rather be making a passive income off growing that investment. You don't usually get rich by working for others. NZ is becoming more of a country of renters and workers.
Investors are eyeing up NZ property for all sorts of reasons - environmental, security, geopolitical/stability, demographic, climate etc etc etc.
It's these structural type factors that are driving up the price of property in NZ. They are far more relevant right now than the usual cyclical features.
Some people have been slow in realising what's actually going on. In fact, there's a major structural shift in NZ property now underway.
The reasons you mention are all valid, but so are - money laundering, our total lack of controls over who can purchase (compared to other countries etc.), our rapidly increasing capital values, lack of any taxes like stamp duty etc.
And as for a major structural shift, well you could be right. But it's also the kind of thing people say just before a massive crash.
I am not suggesting the inflows are in any way illegal or laundered , but I would guess if one was to launder money , you would not really care what the yield was , would you ?
If you were ;laundering illegal drug , untaxed or stolen money , your primary objective would be to legitimise it , and the yield would not be the key investment element .
Hard to complete against country's with massive scale, little or no health and safety, pollution controls or any of the other basic controls (costs) we take for granted, all adding up to kiwis being financially swamped by overseas money, ill gotten or not.
I for one wont be voting to continue to make NZ a country of tenants in their own land. Only 103 days to run...
It seems that this year would provide more prospects for the commercial market, though just slightly. Overall, the figures do show improvements from an overall perspective. Thus, we can expect to see more commercial buildings yielding more success like storage facilities, retail outlets, and even the food and beverage sector.
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