Potential for growth draws global real estate giant to New Zealand

Saturday, 27 May 2023

An artist’s render of a tower of premium-grade office space Hines is building in the Melbourne CBD.

Opportunities in the build-to-rent sector are one of the “compelling” reasons a global real estate developer and fund manager is expanding into the New Zealand market.

Hines, which has offices in 395 cities around the world, and manages a $96 billion portfolio of residential and commercial property assets, officially opened its first office in New Zealand this week.

The company had been building its network in this part of the world since 1996, and is now established in seven Asia Pacific countries, with three offices in Australia.

Hines Asia Pacific chief executive Ray Lawler said a move into New Zealand had been on the cards for some time.

The company had $6b in assets under management in the Asia Pacific region in 2022, up from $2b in $2018, and the region was a number one focus for growth, he said.

“New Zealand’s marketplace is a natural extension to what our teams are already doing in Australia, and although the two countries are different, there are similar dynamics at play.

“There is investor interest in the Asia Pacific, and in what we are doing in Australia, and that relates to what we can do in New Zealand. Opening up here is a strategic offer for our investors.”

The emerging build-to-rent sector will be a focus in New Zealand, Hines Asia Pacific chief executive Ray Lawler says.

While New Zealand was small, it punched above its weight, and presented the company with opportunities, he said.

“We see huge potential for growth due to strong market fundamentals, excellent demographics and strong interest from institutional capital over recent years.

“Transparency of government, and some competitive yields, particularly in some specialised niche areas, also make it an attractive market.”

The company planned to build a sustainable, long-term business in New Zealand, and the key to doing that was to have a mix of product types, developments, and funds, he said.

To that end, the company had identified three market areas to focus on. They were the emerging build-to-rent sector, value add offices, and the logistics sector.

Build-to-rent, which was the development of multi-unit residential buildings for long-term rentals rather than sales to individual owners, was heralded as part of the solution to the housing crisis, but had been slow to take off in New Zealand.

Lawler said Hines had been investing in this property type around the world for many years, and was getting into it in quite a big way in Australia.

The company had three build-to-rent properties in Melbourne, and recently announced an A$1.5b partnership with Cadillac Fairview to develop and acquire build-to-rent assets in Australia.

In New Zealand, there were similar affordability issues, supply and demand dynamics, and changes in household formations that were leading more people to rent, he said.

“But we have a chance to get into this market at an early stage here, and that’s exciting. We think we can get ahead on this one, and create some great assets.”

There were also opportunities in the logistics sector, and in the value-add office space, where old “brown” office buildings were upgraded into “green” sustainable buildings, he said.

An artist’s render of T3 Collingwood, which will be the tallest timber building in Melbourne.

“Climate change is the crisis of our lifetime, but in our business it is also the opportunity of our lifetime because 40% of emissions are currently from the built environment.

“We are committed to a net-zero carbon target by 2040 without buying offsets, and the easiest way to make a difference is to take an old building and make it green and sustainable.”

There were still situations where the company built new, but it was done sustainably, he said.

An example was its 15-floor T3 Collingwood development, which was being built from sustainably grown timber, and was carbon-neutral. When completed, it would be the tallest timber building in Melbourne.

The company is looking for the right opportunities, Hines New Zealand representative James Molloy says.

It was a game changer, and Hines placed high value on such sustainability, innovation and service, he said.

“Those principles will be critical to unlocking the full potential of New Zealand’s market, but the timing is right for our entry into this market, and we are pleased to be able to get in now.”

James Molloy, who was formerly Oyster Property Group’s general manager investment, had been appointed to head the New Zealand office.

He said the company had not made any investments yet, but it was currently looking for the right sites in the best locations to develop, or the right assets to acquire or invest in.

“We are looking around New Zealand and are open to opportunities anywhere, although Auckland, Wellington and Christchurch are key geographic locations for us.

“It is important to get our first deal right, rather than just making one for the sake of it.”

The company had a long-term strategy, and planned to grow the business organically, while making a difference to the built environment, he said.

“I’ll be taking advantage of Hines’ global expertise to identify and source exciting local opportunities, but we are keen to partner with local government, brokers, lenders, and investors too.”