Overseas investors target New Zealand industrial

Australia’s largest superfund has made its first move into New Zealand, a sign of the country’s increasing appeal to overseas investors chasing stable, scalable real estate assets.

July 22, 2019

Australia’s largest superfund has made its first move into New Zealand, a sign of the country’s increasing appeal to overseas investors chasing stable, scalable real estate assets.

AustralianSuper has partnered with Industrial developer and investor Logos Group to develop a NZ$500 million (A$479 million) industrial platform, which includes the development of the Wiri Logistics estate in Auckland, and the purchase of 14 hectares of land adjoining the estate.

Increasing compulsory superannuation contributions from Australian employers is putting greater pressure on Australian funds to allocate capital offshore, with A$27.6 billion remaining uninvested by the end of 2018.

New Zealand’s Industrial market is an obvious choice for investors looking for strong fundamentals, says Ross Bolton, director of Capital Markets in New Zealand for JLL.

“New Zealand’s industrial market benefits from low vacancy rates – an historic low of 1.5 percent in Auckland - as well as years of Government underinvestment in infrastructure, thereby restricting new areas of land supply and growth to support the shifting supply chain ecosystem, servicing the new era of global logistics and movement of goods.”

The country’s solid, sustainable and predictably growing economy with strong key future demographic indicators is keeping occupier demand high too. The 4.9 million strong nation had GDP growth of 2.7 percent in the year ending March 2019, and it is one of the only countries in the world with a progressive economic framework that focuses on the well-being of its residents.

New Zealand has a growing reputation of being a safe haven for long-term investors in an increasingly uncertain global economy and the partnership is likely to further put the country on the radar, says Bolton.

“It will certainly help secure New Zealand’s place on fund mandates but more so, it will demonstrate the requirement for investors to consider more fund-through deals in order to satisfy that ever increasing pool of capital.”

Accessing the market

AustralianSuper - which has an A$11 billion portfolio - and Logos, plan to transform their combined 24-hectare site into a prime logistics estate offering up to 120,000 square metres of quality logistics space for Auckland.

Sites of this scale are scarcely available in New Zealand, says Bolton.

“The country is generally difficult for offshore and institutional funds to access because it just doesn’t have the scale and quality of assets that these investors are looking for, so product and opportunity would have dictated the timing of this deal.”

Despite the challenges for entry, New Zealand has experienced a significant increase in foreign investment over recent years, with particular focus on offices.

In June last year a 50 percent share of the ANZ Centre was purchased by Invesco for NZ$181 million, at an initial yield of 5.3 percent, with several institutional funds as under bidders, showcasing the level of frustrated capital.

In April, Australia’s Macquarie Group bought a New Zealand carparks concession from Skycity Entertainment for NZ$220 million (A$219 million).

In the industrial sector, capital is being deployed via development strategies, says Nicholas Wilson, head of Capital Markets Research, JLL in Asia Pacific.

“There is obvious underlying demand from an occupier perspective so it’s a build-to-suit or development play rather than acquisitions of stabilised assets – in part due to the ability to scale investments.”

Partnerships are also emerging as a preferred option, he says.

“A lot of passive capital like pension funds and sovereign wealth funds are forming joint ventures or separate accounts with best-in-class logistics managers; Logos, Goodman, ESR, GLP and Prologis have been key beneficiaries of this trend. Canada Pension Plan Investment Board for example has made a number of commitments across APAC with Goodman, ESR, Indospace and also with Logos for Indonesia.”

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