Morgan's missive included comparisons between the high productivity of the United States and low performance here, the impact of New Zealand policy settings, and issues directly related to property investment such as yield and cycle pointers, depreciation and internal rates of return.
But first, back to the where the market is heading.
Commercial developers and their advisers thought they had a fair idea couple of years ago about what was happening in Auckland's central business district, in particular. But even since construction of the Royal SunAlliance Centre began, participants in the office market have seen several potential direction changes.
A tightening of office space requirements is one trend, but Metropolis developer and One Queen St refurbisher Andrew Krukziener says the winners of the future will be those firms that treat their staff more kindly.
He told students at Auckland University's property school last week that quality staff and partners in professional firms will migrate to better space rather than to cubicles.
Some migration to the fringes is occurring, but there are doubts over how far it will extend.
In other segments of the property market, the growth of the city apartment market continues to amaze many people, there is a resurgence of small-premises retailing on Queen St and syndicates continue to be popular.
Infrastructure requirements mean some large construction and engineering firms will do well, and for small investors wanting to catch some of the action that may require indirect investment.
There is also some guesswork to be done in the regional infrastructure area - for instance, on who might benefit from growth, or lack of it, along various corridors. That can affect transporters and distributors, owners and buyers of land along the right and wrong routes, and the owners of large industrial boxes.
Gareth Morgan brings his role as an economist to bear on his considerations as a director of PFI, which means weighing up factors such as the enormous sums of money floating about the western world looking for a home, the nest-eggs baby-boomers are stacking up and the changes in investment emphasis as the boomers' needs and desires move on.
Morgan believes over-production is behind the Asian economic crash, says New Zealand has over-capacity in many industries including forestry, low-level production, semi-conductors and oil, and finds New Zealand's treatment of technology is defensive whereas Americans get in earlier and make aggressive gains.
He believes the Asian economies, in the wake of their crisis, "are trying to defy gravity.
Meanwhile, New Zealand investors need to understand where over-capacity and growth requirements lie.
"These are potential tenants we're talking about.
On the US-NZ comparisons, "the US has had unbelievable productivity growth in the last 10 years and there's no sign of the place slowing down. By comparison, our rate of growth has dived since 1994. Theirs is 4 per cent, ours is negative, about half a per cent.
"In New Zealand we tend to take up technology to defend our profits, not to advance. The real money is made at the front end of production, not the back end. In the US, there has been a productivity rise and lower unemployment.
"In America they're tending to put that wealth into American companies. They invest in technology and productivity gains.
While Americans invest evenly between stocks and housing, policy settings which give tax advantages to investing in houses mean New Zealanders are heavily weighted to that sector.
On productivity, Morgan gives us a mark of 5 out of 10 and on a flexible labour market the country scores 7. But on boomers investing in New Zealand companies, Morgan says: "there's no way you're going to do that for that pathetic return, and he gives us a 3. For producing things the rest of the world wants, he gives us a 4.
Morgan says tax breaks - no tax until harvesting - have made forestry schemes popular. "Another area of terrible returns is farming. That's bad for New Zealand because it's got our valuable capital tied up in a loser.
He says the baby-boomers will influence asset prices even more strongly over the next decade, through to retirement for the first of them.
"Boomers drove house prices and interest rates up, wages down. Now we [Morgan admitting he is one of this controlling generation] are driving money into asset markets, interest rates down. As we drive money into property and shares we drive their yields down, prices up.
On Auckland industrial property, Morgan says the cycle seems to be about three-and-a-half years, the vacancy rate now is low at 6 per cent compared to Christchurch's 15 per cent and might take three years for the yield gap to close. That is the gap between bonds, about 5.5 per cent now, and property yields, about 9 per cent.
Morgan says price stability means the property sector must take more prudent account of depreciation. "You can get a potent mix where the internal rate of return is less than the yield, insufficient account is taken of depreciation and the property is over-rented [rent is above the market rate so there is no growth potential for a period]. What you're actually doing is not getting a higher yield at all, you're consuming capital.
PFI's annual report shows a quality portfolio with a property yield at 10.4 per cent and space on some sites for expansion, an average remaining lease period just over eight years, but net earnings on equity of about 5 per cent.
Chief financial officer Wayne Silver says that is not an adequate return and is not one that investors should expect long-term.
Capital-raising last year and the time lag between receiving and investing the money, held 1998 returns down, but he says the return should rise this year, although the second instalment on the new shares would have the same lag effect.
