Overseas investment in commercial property is gaining strength, with interest from the Asian market particularly robust.

The investment is driving up prices, lowering yields and providing vendors with better than expected returns, NAI Harcourts general manager Michael Grainger says.

To bring in the overseas dollar, NAI Harcourts is using its global reach to connect with Asian investors.

Grainger says relationships with NAI Global offices in Taiwan, Japan, India, Korea and Malaysia mean clients using NAI Harcourts have a wide market readily available.

“Overseas investment used to come largely in the form of dollars from corporate Australia. However, that has changed dramatically over the past 10 years and it’s now Asia, and particularly China, where the bulk of the investment comes from. We are seeing a mix of both corporations and high net worth individuals looking to invest.”

Nicolas Ching

NAI Harcourts Auckland Central director of sales Nicolas Ching says he regularly taps into NAI Global’s network to find the best buyers for his vendors.

Recently he sold an entertainment complex on the North Shore to a family in China for $7.76m. This was purely an investment, with the family having no plans to develop.

In another recent sale, Ching sold a two storey retail block in New Lynn to a Chinese investor for $3.55m. Again this was a passive investment.

Ching says Asian investors find the yields in New Zealand highly attractive compared to what can be achieved in Asia. He says it is not uncommon to be able to purchase at a 7% yield here, whereas in places such as Hong Kong the best investors can hope for is around 3%.

The recent establishment of two Chinese banks in New Zealand, ICBC (Industrial and Commercial Bank of China) and CCB (China Construction Bank), is a good indication of the seriousness with which China is taking the New Zealand market.

The trend is also clearly shown in the latest global capital trends released by Real Capital Analytics for Australia.

Transactions in Australia reached $9.5b, rivalling its post global financial crisis quarterly high. This is largely due to overseas interests, which account for half of recent activity. Foreign buyers were involved in $6.8b of the $13.7b of acquisitions in Australia in the first half of the year. Yields continue to trend lower, especially in secondary markets for non-prime assets.

In Asia Pacific overall, however, commercial transactions have slowed in Quarter 2, the first decline in two years. Volume totalled $90.7b, down 29% year on year, with declines pervasive across most property types and nearly all countries, except India, Taiwan and the Philippines. Hotels were the only property type to record a gain in transactions for the first half of the year, driven by multiple large deals in China.

Grainger says New Zealand is experiencing similar trends to Australia, and is an exception to what is happening across the rest of Asia Pacific.

NAI Harcourts national statistics show there have been 1417 transactions in the year to date, a 7.1% increase on the previous year. There has been a huge jump in written value, which is up 61% on the same time last year.

Grainger says this is an indication of the top dollar being paid for investments, the result of both foreign investment and a growing population creating demand.

“We have off shore buyers looking to invest here and we are seeing no sign of a slowdown. I would expect the strong market to continue for the foreseeable future.”

NAI Harcourts is part of the NAI Global network, which manages over 5000 professionals and 325 offices in more than 50 countries throughout the world.