Estate agents thinking big

People searching for an Auckland house can take some comfort: even real estate chiefs on transfer find it hard.

When Jones Lang LaSalle's new managing director, Peter Coman, arrived from London a few weeks ago, he soon learned first hand about the difficulties of finding the right house.

South Islander Bryan Thomson, appointed chief executive of the 160-office Harcourts agency at the beginning of the year, found it no easier when he moved the family to Auckland from Christchurch.

Choosing the right school, an area within easy access of his office on Great South Rd at Penrose and not too far from the water, proved a challenge.

Orakei fitted the bill, but he says working in the industry was no help when it came to house hunting: "In fact, I think it makes it harder because you just have to be so careful how you handle things."

Apart from the challenges of re-locating, Coman and Thomson have ambitious expansion plans.

Harcourts, which sells $8 billion worth of houses in New Zealand and in Australia annually, wants to expand its agency base in Auckland.

Having 41 offices is not enough. He wants at least 10 more, starting with Meadowbank, Mairangi Bay, Takapuna and Devonport.

Last month, Harcourts began screening properties for sale on Sky Television. The non-stop programme is for digital subscribers and is on Channel 95. The week it was launched, Harcourts sold over 1000 properties in a week, through its 245 offices in NZ and Australia.

Coman plans to beef up the sales staff at Jones Lang, doubling the numbers of agents from eight to at least 16.

Jones Lang sells "hundreds of millions" worth of commercial, retail and industrial real estate in New Zealand, but Coman said he hoped that would become $1 billion.

The local outpost had been overlooked in favour of India, China and Japan, where operations have expanded and in some cases doubled, he said.

Jones Lang's research shows half the Fortune 500 companies out-source information technology development to India. China's economic growth and the rise of its middle class was also fuelling a real estate boom.

"We want to regain our rightful and appropriate position," Coman said.

Jones Lang's chief executive of Asia Pacific, Peter Barge, also sees a bright future for a larger office, particularly with Australian investors wanting to flee across the Tasman for better takings.

"The Australian market is like a billabong in a dry season - they have got to escape and go overseas," Barge said.

During the next month, Coman wants to develop a strategy for expanding the agency business and plan for the firm to build on its strengths.

He was appointed to head New Zealand from July 1, taking over from Don Harrington, who ran the operation for eight years.

Harrington has become capital markets regional director.

"Essentially, I am going to be focused on doing deals but more off-market and utilising more of our in-house research and consultancy/valuation capability to package investments," Harrington said.

"I will be working in the higher dollar value end of the market, say $15 million plus with most focus on office investments.

"In simple terms it is a bit more strategic than straight brokerage but still entails matching buyers and sellers."

Coman, 37, a New Zealander, worked at the Auckland office between 1993 to 1995 but went overseas to work for Pricoa Property Private Equity, a wholly owned subsidiary of Prudential Real Estate Investors. There he was in charge of deal origination, structuring, due diligence, execution and post-acquisition management of real estate private equity investments in Europe.

Coman's return follows a trend for former Jones Lang staffers. Jones Lang's valuations director, Arthur Harris, corporate property services director Nick Hargreaves and tenant representation director Dean Humphries have all returned.

Coman sees big opportunities to pull more overseas investors to New Zealand. Jones Lang's research shows investor sentiment remains positive and that Auckland remains the city where the majority of investors expect performance to improve in the short and medium term.



Where to now for Auckland property?

Research from global real estate consultancy Jones Lang LaSalle gives a fairly glowing report on New Zealand's office sector, even though most buyers want other types of property.

"Investors favour bulk goods retail and prime industrial over the next 12 months," the research said.

Auckland CBD core office vacancy rates will drop from 12.3 per cent to 10.8 per cent by December next year. Rents are between $165/sq m to $250/sq m and will remain steady until the end of the year.

But most tenants get a sweetener when they shift offices, the research said.

"The most common form of incentive is a six-month rent-free period, although this is lower than Australia, where some markets have longer incentive periods," the research said.

It advised keeping a watch on:

* The education sector, "a major driver of office space demand in the last four years" and occupying 13 per cent of CBD space. The growth rate is slowing and landlords should decide to lease to office or education tenants. Mixing them causes trouble.

* Office conversions - backpacker and residential accommodation are some of the new uses and show a trend likely to continue.

* More investor demand, particularly from Australia. No land tax, no stamp duty on property deals and good yields make us attractive from across the Tasman.

* "Drivers" for big-time real estate: low interest rates, an attractive yield gap, the strong performance of property investments over shares and a limited supply of quality investment.

* New supply: 50,000sq m of new office construction will be finished in Auckland between next year and 2006. Most is pre-leased before building starts "so the market should be able to absorb this space. The knock-on effect will be to older buildings," said Jones Lang, signalling imminent vacancies in lower-grade office blocks.

Jones Lang LaSalle

Harcourts