Market Views

CRE Market Commentary

CRE Market Commentary

As New Zealand enters Alert Level 1 and a sense of normality returns to the country, we want to share our observations currently impacting commercial real estate.

  • The latest Colliers International Research Report June 2020 highlights that 82% of landlords have negotiated a change in rental payments with their tenants in respect of the disruption caused by the COVID lockdown period.
  • The Colliers report goes on to highlight the history of the resilience of the industrial sector in weathering uncertainty and market disruptions. Factors that support resilience include; manufacturing and construction, which are at the heart of the industrial sector, accounting for 20% of NZ’s $300bn economy; accelerated consumer adoption of click-and-collect e-commerce services driving demand in the transport, warehousing and postal industries; and rising Government spending on public infrastructure for transport, rail, and ‘shovel ready’ projects.
  • Goodman Property Trust posted a profit of $284.4m in the 12 months to March 31, which was down on last year due to lower revaluation gains. The listed industrial fund has headroom to breaching debt covenants with an industry-low 18.9% gearing. Chief executive John Dakin said, on the state of the portfolio, “A secure and efficient supply chain, which includes warehouse and logistics facilities close to consumers, has proven to be essential for a modern city to function and grow. Through the lockdown, we saw a surge in online demand, which was already happening internationally. We’re starting to see the early signs of that in New Zealand and we think it is just going to accelerate materially,” said Dakin. Goodman expects the pandemic to increase demand for quality industrial locations.
  • Chris Caton, the global head of research for Prologis, the largest owner of industrial space with over 46m sqm in the U.S. and nearly $130bn of assets under management, said that a single percentage point increase in online shopping for retail purchases could create enough demand to fill 4.6m sqm of new warehouse space.
  • Re-leased have shared their latest NZ rent collection report for May 2020. Their rent reconciliation report shows the percentage of the monthly rent collected 27 days after the 1st of the month. A summary across sectors highlighted that the industrial sector collected the highest at 78% of May rent, the office sector collected 67%, followed by the retail sector, which collected 46%. The overall reported rent collection rate was 63% across all sectors.
  • Last week, RBNZ Governor Orr reiterated increasing QE would be the first option should the RBNZ decide more monetary stimulus is needed. With as much as $60bn in RBNZ QE by next May, the RBNZ “have a long run-up at the moment.”
  • The Government has announced a temporary law change to force commercial landlords and tenants to consider COVID-19 in disputes over rent issues. The law change only affects a small number of parties who have previously not engaged in proactive discussions over lockdown.
  • An analysis of the listed property market highlights an average loan-to-value ratio (LTV) of 30.5%. Most listed property funds have LTV limits of 45-55% before they breach debt covenants, which illustrates that NZ commercial real estate has significant headroom and downside protection should market conditions worsen.
  • The advent of COVID-19 has seen increasing pressures on the office market with a shift towards working from home. However, a Colliers International workplace survey that asked respondents to rate their productivity over the lockdown period reported 52% of respondents felt their productivity decreased, 41% reported no change in productivity and 8% saw an increase in productivity when working remotely.

As the market begins to re-emerge, the Jasper team is assessing a high volume of opportunities to position ourselves and our investors to take advantage of the recovery. The current uncertain economic conditions will see investors focus on emerging growth trends within the e-commerce and logistics space, while re-prioritising risk towards fundamentals such as prominent locations, robust tenant covenants, and security of income. We look forward to introducing new and resilient investment opportunities to the platform in the coming months.

Please feel free to reach out if you would like to discuss any of the above.

Vernon Sequeira - Jasper

Vernon Sequeira

Investment Manager

Posted on 8 Jun 2020

Invest with us

Our expertise in acquiring and managing real estate assets, combined with our proprietary technology, helps us generate strong risk-adjusted returns for a diverse range of investors.

Private Investors - Jasper Property

We make commercial real estate investment accessible to private investors in a simple and transparent way.

We provide private investors with curated opportunities, low minimums, low fees, transparent reporting and improved liquidity. All available through our secure online platform.

We manage the entire investment process for you from start to finish; you sit back and enjoy direct commercial property ownership and the passive income it can provide.

Read Important Disclosures

 Institutional Investors - Jasper Property

A strategic partner for institutional capital

Jasper is an experienced operating partner for family office and institutional investors wanting access to high-conviction real estate strategies across Australia and New Zealand. We co-invest alongside our partners in each joint venture.

We are proud of our track record and relationships with some of the biggest names in real estate, including Blackstone.

Financial Advisors - Jasper Property

Partner with us to unlock the value of commercial real estate for your clients

We make it easy for you to add commercial property investments to your clients’ portfolio mix. Contact us today to find out more.

Important Disclosures

Liquidity Not Guaranteed: Jasper offers secondary market functionality on its platform, however, there is no guarantee that you will be able to exit your investments on the secondary market or at what price an exit (if any) will be achieved.

Performance Not Guaranteed: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this website will be profitable, or equal any corresponding indicated historical performance level(s).

Risk of Loss: Investing in commercial real estate involves a high degree of risk and may result in partial or total loss of your investment. We encourage our investors to invest carefully. We also encourage investors to get personal advice from your professional investment advisor and to make independent investigations before acting on information that we publish.

No Personal Advice: Jasper does not provide personal advice or recommendations. The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. It is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice before making a decision.

Wholesale Offers: Jasper currently only offers financial products to wholesale (or other qualifying) investors. Jasper does not currently hold a Managed Investment Scheme (MIS) license.

FSPR No. 692011. Information on this page is based on information available to us as of the date of posting and we do not represent that it is accurate, complete or up to date.