Alternative investments in New Zealand

December 11, 2017 / By

New Zealand has remained a destination for international capital in 2017. While real estate transaction volumes have moderated year on year, in large part due to a lack of stock available for sale, offshore investor activity remains above historic norms.

New Zealand provides an opportunity to diversify commercial property portfolios in a mature and highly transparent market with stable governance and solid growth prospects. This is true both in the traditional commercial real estate sectors as well as New Zealand’s growing alternatives market.

With competition tight for big ticket assets such as traditional CBD office buildings and shopping centres, both local and offshore investors looking for scale are now considering alternative markets to achieve yield and asset diversification.

Rise in alternative investments in last three years

Over the past three years, the volume of sales for alternatives, namely hotels, student accommodation, retirement villages and medical properties has increased markedly as a proportion of total property transactions.

Over 2013 and 2014 less than 10 per cent of transactions in New Zealand were for alternative assets, whereas 2015 and 2016 achieved 18 per cent and 16 per cent respectively. In the nine months leading to October 2017, 14 per cent of total transactions has been attributed to alternatives, demonstrating the continuation of investor interest and opportunities in this growing sector.

Unique opportunities in the alternatives sector

One such opportunity was recently announced in the South Island’s largest city, Christchurch, with the offering of a five-star hotel. What makes this opportunity unique is the fact the hotel site is located directly adjacent to the Christchurch Convention Centre, one of New Zealand’s largest construction projects.

The Convention Centre is being funded by the New Zealand Government at a cost of $475 million NZD. The state-of-the-art facility will have capacity for up to 2,000 delegates and its completion in early 2020 will mark perhaps the most significant milestone in the city’s $40 billion NZD rebuild post the February 2011 earthquake.

The hotel site adjoining the Convention Centre has been designated for a true international five-star operator, with JLL seeking an investor to develop the property. Given the site’s position, the completed hotel will enjoy internal access through to the Convention Centre and a number of shared services and facilities.

Major infrastructural projects to drive investment opportunities

The relationship between Convention Centre and hotel is symbiotic in that the convention business relies heavily on the ability to offer a range of quality accommodation options for delegates to choose from. This is particularly pertinent in Christchurch where 1,250 CBD buildings where demolished following the earthquake, including the majority of the city’s hotels.

With a dearth of five-star hotel options in Christchurch, there is an opportunity for an astute investor to capitalise on the demand created by the Convention Centre. Prior to the earthquake, Christchurch captured 24 per cent of the national convention business.

The growth of tourism in Christchurch, given its position as the gateway to the wider South Island, is another key demand driver for room nights. By 2023, an estimated 4.9 million international tourists are expected to visit New Zealand annually, spending $15.3 billion NZD in the process.

Opportunities such as this, which centre on major infrastructure projects like Convention Centres, are placing New Zealand on a global platform as a destination for international investors seeking allocation into alternative assets.


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