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Commercial Property is Alive and Kicking Despite the current climate, commercial property is thriving for investors, says Scott McKenzie, CEO of PMG Funds, where the flagship Pacific Property Fund Limited is about to buy three more industrial properties. It has certainly been a disruptive few years for New Zealanders as we’ve contended with a global pandemic as well as increasing interest and inflation rates. However, it’s during these times that many of us will be thinking about the future and how to protect your hard-earned wealth. One of the ways we can do that as investors is through commercial property, which continues to thrive as a defensive asset class throughout inflationary times. At PMG, we own over $900 million in quality commercial property across our five well-established funds, from retail to office to industrial buildings, located from Whangārei to Invercargill. Our occupancy rate is 99% across our portfolio, returns remain strong, and rents are on the rise. Industrial sector is booming Right now, some of the most defensive assets can be found in the industrial and logistics sectors. That’s why we’re undertaking a capital raise for Pacific Property Fund which currently owns 20 properties around Aotearoa, with 64 tenants, and which is currently valued at $437 million. The raise will see us buy three more properties, located in Hamilton and Whangārei. All three are leased to Keith Andrews Trucks, S P R I N G 2 0 2 2 | I N F O R M E D I NVESTO R 9 4
which sells vehicles to the logistics sector. Logistics has been one of the fastestgrowing industries since the start of the pandemic in 2020, with no sign of slowing down as online spending gathers momentum. To buy these three properties, and reduce the fund’s proportion of borrowing, we’re looking to raise up to $85 million. That will help us further strengthen the fund’s resiliency during the current high inflation and high interest rate environment. Our forecasts predict returns of 5.3% annually, after expenses but before tax, for the next few years – although of course these are not guaranteed. Tangible assets like property have
traditionally been defensive against inflation, and that remains true in this economic cycle. And as a PIE fund, this fund continues to be an appealing option for high-earning investors. The office is alive and kicking There will always be demand for high quality office space for people to connect and collaborate, and the office is facing a bright future. Most metro areas have vacancy levels below 3% for prime and A-grade office spaces. Wellington is strong, Christchurch is solid, and Auckland’s vacancies are focused on a few specific buildings. Humans are innately social creatures. Working from home is an important trend and it will continue to have an impact on demand for
