The Chinese Year of the Tiger could spell renewed interest in New Zealand commercial property from offshore investors seeking a safe haven amid Covid chaos, a leading Asian sales specialist says.
James Chan, head of Bayleys’ Asian Markets division, has seen international investment in the country’s commercial real estate grow from almost nothing to a major market force during his 30-plus years in commercial real estate sales.
As New Zealand emerges from two years of Covid uncertainty, he believes the Year of the Tiger heralds more positive times with new interest in our market among offshore investors who see the country’s economy and health response as having outperformed most of our global peers.
“In Chinese tradition, the Tiger signals a good year, and its attributes of ambition, courage and self-confidence will offer extra drive to all investors after recent challenges,” says Chan.
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“Chinese New Year or Spring Festival is celebrated not just by those from mainland China, but also countries and regions such as Singapore, Hong Kong and Taiwan Malaysia, the Philippines and Thailand. We’re seeing and hearing growing signs that investors from these and other global markets are targeting New Zealand as a haven of relative safety and stability.
“Investing and doing business here was already seen as straightforward thanks to our stable political and economic environment, relatively simple transaction processes and competitive commercial property prices.
“Renewed international buyer interest will be good news for local vendors, in the form of heightened competition and demand,” says Chan.
Born and raised in Hong Kong, Chan came to New Zealand in the late 1980s and joined Bayleys to help establish its Asian Markets division, later becoming the first Bayleys salesperson to achieve gross commercial and industrial sales of $1 billion.
Today he leads a specialist team of multilingual salespeople servicing both offshore and local South East Asian investors.
His career has spanned several property cycles as well as 12-yearly cycles of the Chinese zodiac.
“Around the Year of the Tiger in the late 1980s, it was hard to find buyers for the commercial properties that large corporates, banks, receivers and statutory managers began unloading after the 1987 share market crash.
“Given the shallow pool of local buyers and domestic capital, this period saw the emergence of overseas investors as a new source of potential purchasers,” says Chan.
“Japan, Singapore, Hong Kong and Taiwan were among the first countries or regions to yield transactions. The ranks of South East Asian investors – individuals, families and companies – grew as the commercial property market bottomed out in the 1990s, often buying at double-digit income yields unthinkable back home.”
Notable transactions around this time included the sale of the iconic Chateau Resort Hotel at Tongariro to a Malaysian investor.
Hong Kong-based Hind Group, owned by the Jhunjhunwala family, bought $100 million of Auckland properties, establishing longstanding family ties with New Zealand furthered in recent years through ownership of the Sudima hotel chain.
“Mainland China was still largely inaccessible to vendors or agencies at that time but an opening of New Zealand immigration saw the beginning of a wave of new residents from South East Asia, and China – many of whom came with an active interest in commercial property.”
Despite this early activity, when Bayleys pioneered portfolio auctions with the launch of its Total Property portfolio soon after the 1998 Year of the Tiger “almost all commercial and industrial vendors and purchasers were Kiwi”, says Chan.
“Now we have clients of all ethnicities – or their New Zealand representatives – active in the auction room, along with offshore vendors selling through us.”
New Zealand’s world-first free trade agreement with China in 2007 opened up new possibilities to source buyers.
The Global Financial Crisis, which followed soon after, saw Asian investors looking for counter-cyclical opportunities.
This meant that by the time the Year of the Tiger returned in 2010, the Tiger’s ambitious and courageous attributes were again to the fore – setting the scene for sustained growth in Asian investment in New Zealand commercial property.
More recent years have seen the growth of digital channels targeting Chinese-speakers, such as HouGarden, as well as strategic global collaborations like Bayleys’ partnership with Knight Frank.
Ryan Johnson, national director of Bayleys’ Commercial and Industrial and head of Capital Markets, says the Knight Frank alliance has further strengthened Bayleys’ reach - in particular in Hong Kong, Singapore and China.
“Our teams have the ability to derive insights and expertise from the Knight Frank pool of market-leading research and resources across global markets. Together, Bayleys and Knight Frank have an unmatched ability to connect buyers and sellers on a global scale, and have further lifted the profile of New Zealand commercial real estate among domestic Asian communities and international markets and resulted in significant transactions,” says Johnson.
By the late 2010s, Asia had become one of New Zealand’s biggest sources of capital, with China second only to Australia as a source of foreign direct investment.
Investment from China including Hong Kong reached NZ$10.6 billion in 2018.
The NZ China Council has estimated one-sixth of this went into commercial properties, hotels and apartment developments, largely focused in Auckland.
“Along with major transactions, this growing interest in New Zealand commercial property can also be seen in the form of development,” says Johnson.
“The impact is shaping the Auckland skyline, with Chinese developers driving key projects such as the luxury Park Hyatt hotel and the country’s two tallest residential towers, the Pacifica and Seascape.
“Future predictions are tricky in the Covid era. But as we look ahead to the Year of the Tiger in 2022, it seems certain that offshore exposure will remain a vital element of key property sales – and that Asian investors and developers will remain an important part of our commercial and industrial property landscape,” Johnson says.
- Article supplied by Bayleys
