The Global Waltz One Step Forward And Two Back

Posted on Wednesday, September 21 2011

It is just as well that we Kiwis are being hugely distracted at the moment by the Rugby World Cup. If it was not the case then we would be getting hopelessly depressed about the economic state of affairs in the Eurozone.

It seems that Greece is almost certain to default on its sovereign debt and this may very well be the domino that brings down the house.

Whilst it all may seem remote from this part of the world, if that scenario actually unfolds then we will feel the effects through our exports to that part of the world and the flow-on effects on the availability of credit.

Again, all of this impacts the commercial property sector as confidence falls away and businesses defer that move to new premises. Investors will only be seeking those properties with strong tenant covenants and long leases to weather the stormy years ahead. I believe that the market is already pricing in the difference between prime and secondary properties.

There is no doubt that this is not a temporary or short term problem as the amount of money printed both in Europe and The States will have a drag effect for years to come until the respective Governments get some of that debt off their balance sheets and balance the books. Some estimates I have seen have put a time frame of seven years at least for this to occur and that assumes no further shocks.

Yes, we are insulated to a degree here in New Zealand and there has never been a better time to consider well leased commercial property as a defensive investment against the global turmoil.

Just make sure that the tenants will survive the next few years and be very wary of long term debt on such properties.

In the meantime, go the All Blacks!

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Denis McMahon

Brought to you by Property Managers Ltd: Pacific Property has been formed with the aim of building, over time, a diversified portfolio of Industrial, Retail and Commercial properties to provide strong sustainable returns to investors which will be managed by experienced property manager, Property Managers Limited (PML). The directors of Pacific Property Fund are Denis McMahon and Philip Tushingham, who together have over 45 years of experience in investing in, and managing commercial properties. “Pacific Property presents an opportunity for investors to invest in a brand new quality industrial building in Mount Maunganui and to join us as we build a quality commercial property portfolio diversified both geographically and across industrial, retail, and commercial assets.”

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