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  • ryanjoseph

    Real Estate Dorota Dyman & Associates blog: Foreign funds eye NZ commercial real estate

    3 years agoReply
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    International investors with a total of US$2 trillion ($2.34 trillion) in funds have put New Zealand in their top-10 list of Asia-Pacific real estate investment targets.

    A survey out this month from the Association of Non-Listed Real Estate Investors put New Zealand on its list for the first time, said Justin Kean, JLL New Zealand's head of research and capital markets.

    New Zealand was ranked eighth.

    "The association represents investors with a total portfolio of some US$2 trillion. If international investors allocated just 1 per cent of their assets to the New Zealand market, we would see $20 billion of capital head this way."

    Kean said about $2 billion of commercial real estate going for $5 million-plus was sold throughout New Zealand.

    That survey comes after Chapman Tripp said last week that more foreign buyers were likely to make bids for New Zealand assets this year with China at the forefront.

    The law firm has released its view on trends and insights into New Zealand mergers and acquisitions and has picked foreign investment as an important trend in 2014.

    Kean said international investors saw New Zealand as a key Asia-Pacific location.

    "The economy in New Zealand has seen a good organic economic recovery kick in in the last 18 months. Positive pressure is warranting a firming of cap rates which is being driven by a weight of both local and now international capital.

    "Institutional investors are back in a buying mode and this means that foreign wealth will start finding its way into the New Zealand property market," he said.

    This year Japan ranks in first place as the most desirable place to buy property, with Australia second.

    Previously, New Zealand was in the "other countries" category, Kean said.

    "We don't have enough real estate to satisfy that demand. So the natural result should be there will be an upward pressure on prices.

    "If a large asset were to come to the market, this would suggest it would be hotly contested among international buyers.

    "If there was a big shopping mall or a commercial office block, local investors would have a lot of trouble keeping up with the pricing of foreigners.

    "If you're in Switzerland and your cost of capital is 1.5 per cent, you can bid at a much higher price and still make the money you want but Precinct Properties or Kiwi Income Property Trust have to make a return commensurate with the rest of their portfolio," Kean said.

    "We are aware of some trophy assets coming to the market. They're currently confidential but that will come along shortly. They're worth more than $100 million."

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  • ryanjoseph

    Real Estate Dorota Dyman and Associates blog: Shelley Bridgeman: Real estate commissions

    3 years agoReply

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    The real estate industry is sometimes viewed with suspicion - no doubt because some of its entrenched processes appear to essentially betray the interests of the vendor. What agents won't tell you about auctions examines the fact that auctions are favoured by real estate professionals in part because, in the absence of more than one "motivated bidder", the vendor is left in the unenviable position of feeling pressured to sell their property at the very lowest acceptable price (aka "the reserve").

    Are open homes dodgy? alleges that open homes are used brazenly by real estate sales people but not for the purpose one would assume. For some it's less about showing off the actual house for sale and more about making contact with other potential house sellers in the neighbourhood.

    The nature of the commission is the third part of the real estate business that can cause sellers discomfort. Firstly, the reasons behind the fact that an agent's remuneration is based on the value of the house concerned are not widely understood. Why should someone be rewarded more for selling a $5-million property than, say, a $500,000 one? Does it take extra effort to say "state-of-the-art Miele MultiSteam oven" than it does to say "plain old Shacklock oven"? Perhaps it's because marble floors wear out the soles of the real estate sale person's shoes faster than unassuming cork. Or is writing down that extra zero an especially onerous task?

    The way commission is structured is also problematic. According to Consumer's 2011 survey, agent commissions in Auckland are 4 per cent on the first $300,000 and 2 per cent on the rest of the selling price. Because the commission is higher for the first few hundred thousand than the last few hundred thousand, real estate sales people have little incentive to negotiate a higher price on your behalf.

    In fact, their emphasis on simply achieving the sale is likely to be counterproductive to getting the best possible price for the vendor. Given the fact that those extra thousands of dollars (which mean a great deal to the vendor) are of little significance to the sales person, it's clear that this commission structure has not been designed to satisfy the needs of the customer.

    Financial columnist Mary Holm has been addressing this issue for years. In 2010 one of her readers asserted that "agents had no sense of pushing the potential buyers to anything but an easy sale, because the final negotiations are worth a small fraction of the overall price" and suggested, as a solution, that the "percentage paid to the sales agent should reflect that the last few thousand is the hardest part to obtain".

    A second reader suggested a cunning ploy that could be used when negotiations for purchase stall: "Say both parties are $15,000 apart. I will say to the agent I will come down $5000 provided the other party comes up $5000 and the agent is prepared to take $5000 off their commission."

    I'd love to try that strategy one day but after the (relatively mild) stress of selling a house eighteen years ago I'm hoping not to repeat the process. Rather than buy a new house we've recently made the decision to renovate our current place. There are several factors at play but one is certainly the desire to stay well clear of the questionable processes and systems associated with having an agent sell your home. I sometimes wonder how much the boom in home renovation can be attributed to people's active refusal to engage with an industry that seems deeply flawed. (Not everyone is suited to selling their own home privately.)

    Obviously all commercial ventures are designed to make money. It's just that few are structured to potentially disadvantage the customer quite as insidiously as the real estate industry. And by the time you've factored in the consideration that for most of us our home is our most valuable asset it's a recipe for serious concern.

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  • ryanjoseph

    Real Estate Dorota Dyman and Associates blog: 7 bold commercial real estate predictions

    3 years agoReply
    Conjuring the future of commercial real estate begins by conjuring our future. How will we work, live, shop or do business? Perhaps no other investment sector is so closely tied to people's most fundamental needs and behaviors; its evolution, to a large extent, follows ours.

    Take it from Peter Linneman of Linneman Associates and the Albert Sussman Emeritus Professor at The Wharton School of Business, who pioneered the academic study of real estate and was named by the National Association of Realtors as one of the 25 most influential people in the business. Commercial real estate, he said, "exists to service the economy and society. That's all we do."

    Over the next 25 years, say Linneman and other key players in the industry, commercial real estate will be buffeted by changes in demographics, technology, globalization, economic and environmental realities and a host of other trends. Some pieces of the trillion-dollar global industry will adapt; others will fall away. It will still be a cyclical business, but no matter how it changes, commercial real estate is expected to be thriving in 2039.

    Here are seven bold predictions about U.S. commercial real estate in 2039.

    1. Most shopping malls will be extinct.
    The world of the American shopping mall, said Kenneth Riggs, president and CEO of Real Estate Research Corp., "has been a Darwinian environment since the 1990s with the advent of big-box retail and the 'Wal-Marting' of the world—and it will stay that way." In other words, expect malls to continue their decline due to the rise in e-commerce, with only those consistently producing very strong revenues still doing business in 25 years.

    "As the J.C. Penney's and Sears continue to lose market share to online retailing, you're going to see more dead malls where the anchors go dark and ultimately are worth only the land they're built on," said Tom Bohjalian, executive vice president at Cohen & Steers, which was the first investment company to specialize in listed real estate.

    Teardowns may not be the only way to capture value in defunct malls, though, said Rick Fedrizzi, president, CEO and co-founder of the U.S. Green Building Council. He predicts that with repurposing, they'll be a useful resource when our way of life swings back to revolving around more compact communities. "Established places like shopping malls will become like town centers, where people can come together, where their doctors and day care will be, where they can gather after major devastations."

    2. Brick-and-mortar will go tech—and warehouses will go back to the drawing board.
    As consumers increasingly shop on their computers and phones, brick-and-mortar retailers will need to adopt the attitude 'If you can't beat 'em, join 'em' in order to survive. Innovation will be key, making use of technology that integrates omnichannel shopping into the physical experience of being in a store and matching the logistical advantages of online merchants.

    "People want to look and touch; they want instant gratification, too," said Maria Sicola, an executive managing director at real estate services firm Cushman & Wakefield, even as selling floors become smaller. "Perhaps there will be the equivalent of a mini warehouse within the store so you can go in the back room and buy what you want."

    Apple is one retailer already using this forward-thinking approach in its stores. Its sales floors feature products that people can touch and try on their own, spending as much time as they'd like. They can buy and take home merchandise if they choose, or they can go home, do further research and buy online—with free overnight shipping. This may be a model other retailers will emulate.

    Efficient distribution will be key, and the increasing importance of logistics and automation will impact warehouses across the country, many of which are obsolete even now, lacking up-to-date technology and adequate clearance height and often too remote to accommodate same-day delivery. That will add up to a lot of activity in the industrial sector in coming years, with old warehouses being retrofitted or new ones being built.


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  • ryanjoseph

    Real Estate Dorota Dyman & Associates blog: Canadian real estate’s next worry: commercial property

    3 years agoReply
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    First, it was Canada’s housing sector. Now, it’s the country’s commercial real estate market.

    Pundits around the world are still immersed in a vigorous debate about just how overheated the residential real estate market here is, and whether it’s destined for a crash. Now some are also training their sights on Canada’s commercial real estate market – the wide array of office towers, shopping malls, and factories that have become hot commodities in recent years.

    The key players in this sector – including Canadian pension funds, real estate investment trusts and insurers – have been saying for at least a year that the market, which has always been cyclical, appears to be near its peak.

    But questions are being raised about whether they’ve done enough to prepare for a potential softening.

    Richard Johnson, a Zurich-based managing director of UBS Global Asset Management, held a meeting with pension funds in Toronto last month and told them that UBS is concerned about their level of exposure to Canadian real estate.

    “With most Canadian institutional real estate investment focused on domestic real estate, pension funds could be seriously overexposed in the event of a downdraft in the market,” he says.

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  • ryanjoseph

    Real Estate News Dorota Dyman And Associates, Tokyo condo supply climbs again

    4 years agoReply

    New condominiums put up for sale in greater Tokyo grew 6.1 percent from the year before to 1,826 units in January, climbing for the ninth consecutive month, the Real Estate Economic Institute said Thursday.

    The figure was the highest for a January since 2,320 units in 2008 and topped the boom-or-bust line of 70 percent for the 12th consecutive month. Purchase contracts were concluded for 78.6 percent of the total. The data covered Tokyo and its three neighboring prefectures of Kanagawa, Saitama and Chiba.

    Demand peaked in September 2013 as buyers rushed to lock in the current consumption tax rate of 5 percent for contracts concluded that month specifying delivery on or after April 1, when the rate jumps to 8 percent.

    Still, demand remained solid throughout and after October, thanks to policy measures that included extended tax breaks for those taking out mortgages, an official of the think tank said.

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