By ANNE GIBSON
"All the recovery with none of the angst" is Andy Evans' view of the year in investment property.
As Property Council president and general manager of property for fund manager ING, Evans sees 2002 as a restorative phase after the doldrums of the late 1990s.
New Zealanders have $420 billion invested in property and nearly $200 billion of that in the high-stake commercial, industrial and retail property. The economy suffers when the real estate sector suffers.
But Evans is delighted with the past year.
Although it was the year of the leaky homes scandal and rising house prices, big-time property investors had a smoother ride through 2002 and fewer surprises than home owners.
Best of all, Evans says, larger institutional investors such as AMP and Kiwi Income Property Trust did the chameleon trick and turned developers, taking on the big jobs and big risks.
Kiwi left its mark with its 40-level Royal & SunAlliance Tower straddling Shortland and Fort Sts in downtown Auckland, and AMP put up its controversial $170 million PricewaterhouseCoopers Tower on the city's waterfront.
"These are people with nous, who do a huge amount of research and don't just chuck buildings up half-empty, flooding the market with vacant space," says Evans as he scans Auckland's CBD from his level 27 offices in ASB Bank Tower.
"The year has seen a slow and steady improvement in the base fundamentals of the market across each sector, but most significantly the CBD offices in Auckland, Wellington and Christchurch.
"That means the imbalance between supply and demand of the past three to four years is starting to realign itself as net positive absorption exceeds new supply, thereby reducing vacancy."
The top end did well, but the bottom end was nicely supported too.
The 95,000 immigrants who came here in the year to October last year helped fill Auckland's lower-grade buildings. A third of the immigrants came from Asia (mainly China, India, Japan and Korea). They need classrooms and apartments, filling second-grade blocks and soaking up space which might otherwise have stood empty.
"Without them, Auckland would still look really sick, especially in the lower-quality properties where the vacancy rate was over 20 per cent in some areas," Evans said.
And the down side of the year: "Any publicity that gives property a bad name, like contractor/builder liquidations, junk bonds that have gone sour and syndicators that continue to push flawed products."
Problems were addressed when the Government tidied up the construction business in late November by passing the long-awaited Construction Contracts Act, improving protection for construction industry contractors and subcontractors who have trouble getting paid.
It had been an agonising 18 months between the bill's tabling and final approval. The law does not come into force until April, although provisions to set up a disputes resolution process for leaky buildings - added to the bill at the last minute - came into force immediately.
Foreign investors showed confidence in us in 2002. Foreigners paid more than $130 million for two Wellington properties - Navire Holdings' $74.2 million purchase of the Mobil-on-the-Park office tower at 157 Lambton Quay in Wellington, was the third largest deal signed off in the September decisions by the Overseas Investment Commission and one of the largest of last year.
ING Real Estate in Sydney has been looking for a $60 million-plus property here all year, with little luck. It came close to buying Wellington's State Insurance building (formerly BNZ Tower) but was thwarted by the German and Luxembourg investors who paid $62 million in August for the tower.
Frank Lowy's Westfield out of Australia carried on spending the $1 billion it has tagged for tarting up our shopping malls. It pulled off the coup of the year in August by breaking the deadlock in the Newmarket mall war and paying enemy Two Double Seven $95.5 million.
Westfield surprised opponents yet again just before Christmas, which proved a good time to strike. It quietly made its application for a non-notified processing of its huge expansion plans for Two Double Seven and was granted the determination it sought, cutting out those who would like a more public airing of the issues, particularly relating to Newmarket's traffic woes.
More to come on this issue undoubtedly this year as the anti-mall protesters vow to take on the battle.
The Resource Management Act continues to frustrate developers and investors, who have given up hope of this Government doing anything other than minor tinkering via the National-initiated but Green-gutted Resource Management Amendment Bill, due to be passed in October but still languishing in Parliament.
It has a business-friendly clause limiting objection rights for minor resource consent applications which pleased the property community, but generally they were scathing about it because it did not go far enough to address their concerns.
With the RMA fixed in their sights, industry heavies rallied in March to form the Auckland Property Group, meeting at the Princes Wharf offices of real estate lawyers Knight Coldicutt.
"The group is a response to frustrations with the RMA, the lacklustre performance of the New Zealand property market, the building industry collapse and other property-related issues," said lawyer Kerry Knight.
Some of the largest developments planned should move forward this year.
The first is Britomart, where the Auckland City Council is selling its historic land and building holdings around the transport terminal, due to open in July. Developer David Henderson has tendered for this golden opportunity - along with at least 50 others - and wants to pour $500 million into the downtown area near Auckland's waterfront to create a lively mix of apartments, offices, shops, restaurants and cafes.
The second is Kiwi Income Property Trust's Sylvia Park, a $300 million mixed-use development of shops, offices, housing, leisure, transport and entertainment, which will be the largest development planned in New Zealand, bringing 145,000sq m of floor space to the Mt Wellington area.
The $57 million sale of Kiwi's management contract to wealthy Australians Colonial First State Property early in the year injected more hope into this project starting, although an iwi is standing in Kiwi's way. It has yet to resolve a Court of Appeal challenge to its plans at Sylvia Park, brought by Ngati Maru and relating to site excavation.
The third large development being planned is for the industrial area between Westhaven and the Viaduct Basin on Auckland's waterfront. The Auckland Waterfront Advisory Group, set up by the area's landowners, is due to release a blueprint for this which is bound to raise the ire of the powerful marine and services industry, dug in on the land and not keen to move.
If the group gets its way with a vision of utopia, the area could have 10,500 people living around the water's edge, making it a community bigger than the Herne Bay and St Marys Bay suburbs combined. Changes on the 32ha of land will not begin until about 2005 and could take 20 years to complete, given that leases on the Tank Farm run through to around 2020. Apartments rose fast around the Viaduct Basin - David Henderson has nearly finished his Number One Hobson, Nigel McKenna is advancing with his Lighter Quay and is selling his Beaumont Quarter, Symphony Group is at foundation level with The Parc, and Dominion Funds has finished its Viaduct Point.
As the Louis Vuitton series draws to a close, at least 400 units worth $10 million are being built around the Viaduct, which one cynic likened to digging up the pitch at Eden Park just before a test match kickoff.
Investors in the listed property sector could do well this year, according to Auckland investment adviser David McEwen, who in December published his predictions of the best yielding products. Property took more than its fair share of the picks: AMP NZ Office Trust is ranked first, Colonial First State Property Trust third, Kiwi fifth and Property For Industry seventh.
2002 a year of recovery - and leaky buildings
AdvertisementAdvertise with NZME.