Waikato Business News May/June 2020

8 WAIKATO BUSINESS NEWS May/June 2020
CONVERSATIONS WITH
MIKE NEALE OF NAI
HARCOURTS HAMILTON
Commercial Real Estate -
what did we learn from the GFC?
COVID 19 DISCOUNT!
This is different from the Global
Financial Crisis, but there will be
some learnings that we can take
from it. There will be owners of commercial
and industrial property (and
real estate agents) that were not around
during the carnage of the GFC. Many
of the issues relating to the GFC were
structural, we saw Hanover offering 9
percent returns on deposits to investors,
when looking at the true risk it should
probably have been closer to double that.
While today’s economy is stronger and
more robust, many of the impacts and
outcomes will be similar, particularly for
vacant or non-income producing assets.
Mike Neale - Managing Director,
NAI Harcourts Hamilton.
FOR LEASE
Levels 2 & 4, 71 London Street, Hamilton CBD
Looking for Affordable Office ?
A Landlord You can Work With ?
Landlord will consider the following to assist an incoming tenant:
• Rent free period (up to 50% discount for the first year)
• Contribution to fit-out
• Flexible lease term
• Affordable rental rates
(* Conditions apply)
Tenancy offering includes:
• Extensive central city views with excellent natural light
• Machina Cafe downstairs and other quality eateries in close
proximity
• Close walking distance to inner city fitness centres, Hamilton
Transport Centre, retail shopping and Centre Place Mall
• Near neighbours include Fonterra, numerous legal firms, FMG
and other professional service companies
Don’t miss this opportunity - contact us now!
For Lease: By Negotiation
www.naiharcourts.co.nz/HCM24633
Mike Neale M 027 451 5133
mike.neale@naiharcourts.co.nz
Brad Martin M 027 889 3018
brad.martin@naiharcourts.co.nz
naiharcourts.co.nz | P 07 850 5252 | Cnr Victoria & London Sts, Hamilton
Monarch Commercial Limited MREINZ Licensed Agent (REAA 2008)
What did we see in 2007 and
the immediate years beyond?
1. Purchaser numbers declined and
became more risk adverse, seeking
higher returns on their capital for taking
on perceived risk.
2. Finance became more difficult to obtain,
especially for non-income producing
assets such as vacant land or
buildings with issues.
3. Sale and lease backs became more
common, as businesses looked to free
up working capital.
4. Leasing volumes generally held up,
although overall vacancy rates increased
and lease terms were shorter.
5. Sale yields and rental rates came under
pressure, as occupancy levels decreased.
The GFC generally saw a decline in
commercial and industrial property values.
We suspect this will happen again,
over a yet to be determined period of
time, creating a ‘U’ shape – you do not
want to be forced to make selling decisions
at the bottom of the ‘U’.
The one really significant saving
grace is that interest rates are low and
all projections indicate they will likely
remain low for many years to come -
with the added possibility they may yet
go lower. It’s also worth noting the Reserve
Bank, as a result of Covid-19, has
recently announced a Quantitative Easing
programme to assist with providing
liquidity to markets, which in turn will
assist in keeping interest rates at these
very low levels. Quantitative Easing
was used in many economies during the
GFC, but not in New Zealand. This liquidity,
combined with the Government
stimulus being announced and spent, is
projected to help cushion the impacts of
Covid-19 on the economy.
Advice going forward?
Those that were the most successful in
mitigating the impact of the GFC were
those that acted early, before other forces
applied pressure. It’s likely to be the
same now – act early and position yourself
for the recovery and to take advantage
of other opportunities that may present
themselves in due course.
• If you need to downsize (or upsize),
then do so.
• If you need to sell (or are in a position
to buy), then do so.
• If you need to reposition your business,
make those calls.
We continue to maintain that Hamilton
and the Waikato is possibly the best positioned
region in the country to weather
the Covid-19 storm. Factors include:
• Near historic lows in commercial and
industrial vacancy rates.
• Strong construction growth across the
residential, commercial and industrial
markets.
• Migration has been strong due to
improved transport networks, house
affordability and generally being an
easy place to live.
We will recover, and our suspicion is
that we are going to recover sooner than
many pundits are currently predicting.
The sooner staff are back to work, the
better culturally for many businesses and
the better for retailers and hospitality operators
alike. Winter will be tough, but
as we come into October and November,
with daylight saving and the imminent
arrival of Christmas, a greater positivity
will likely return to our lives and
workplaces.
The question to ask ourselves:
What will happen to commercial property
yields (and values) when the economy
begins to recover in the months and
years ahead? With interest and deposit
rates likely to still be at historic lows
(as I write this deposit rates are barely
at 2 percent), those that continue to own
commercial property for the long term
will benefit from attractive returns in relation
to the continued low deposit and
mortgage rates, along with the possibility
of future capital gains.
Trends in the New Zealand Housing Market – House Price Inflation
Source: Reserve Bank of New Zealand
NAI Harcourts Hamilton
Monarch Commercial Ltd MREINZ Licensed
Agent REAA 2008
Cnr Victoria & London Streets, HAMILTON
07 850 5252 | hamilton@naiharcourts.co.nz
www.naiharcourts.co.nz
203662AG