Jul 19, 2018

Re-inventing real estate for tomorrow's tenants

PMG’s Head of Asset Management, Steve Williams, and Brian Berry, Asset Manager Central North Island, share how PMG has re-invented commercial properties for tenants and investors alike.

The end users of commercial property are not who they used to be, nor will they be the same in 10 years from now.

Over the past decade we’ve seen a reduction in fashion and homeware-type businesses leasing retail space as they move online , and an increase in hospitality businesses picking up these spaces.

Significant shifts have also occurred in the office sector where floor plates are downsizing, co-working spaces emerging, and unique fitouts being demanded. The Industrial sector has also seen some change from traditional manufacturing to more warehousing, storage, and logistic companies leasing these spaces with much more set to come if you believe in the forecasts.

Unlike many property fund managers, PMG has a dedicated and professional in-house property management team which continually reviews the performance of all properties in PMG managed portfolios. Our experienced property management team can act quickly to maximise the value of a portfolio’s underlying assets, therefore improving the overall return for investors. Here are some examples of where our in-house services have reinvented commercial properties for tenants and investors alike.

At PMG we’ve experienced these changes ‘in the flesh’ and capitalised on them

When the deep retail spaces in 117 Willow Street, in Tauranga (owned by PMG Direct Office Fund) didn’t meet the changed retail environment, PMG re-purposed the rear space of the property, reducing the depth of the retail tenancies.

“Utilising the service lane behind the building, we reactivated it by splitting off the back section of the retail floor plates and created funky co-working spaces for commercial tenants,” says Berry.

“The new commercial spaces at the rear of the property have been leased to architects who want to work in a collaborative working environment. This has increased the rental income of the property as well as the value,” he says.
For two years, a substantial industrial building in Tauranga, of 5,000m2, had been vacant and the owners’ holding costs were significant.

“When they approached PMG for help, in association with the owners, we formulated a strategy that involved subdividing the property into smaller more marketable sizes which would diversify the owners’ risk across multiple tenancies and add value to their investment,” said Berry.

The owners were thrilled to have the property fully leased within 12 months and achieving higher rental rates due to the reduced tenancy sizes.

“Part of our success was due to being very thoughtful about the leasing agreements with each individual tenant,” says Berry. “We created clauses specific to this site which anticipated any issues that might arise, adding value and foresight for the day-to-day management of a multi-tenanted mixed-use industrial site.”

In 2017 PMG managed fund, Pacific Property, made its largest single acquisition, acquiring Kelston Shopping Centre in West Auckland.

While anchored by some key tenants, the Centre had high turnover of smaller tenants. Recognising the needs of the local area, PMG is currently transitioning the Centre away from being purely retail, to providing more of a retail/community mix.

“We are doing this by strategically re-leasing retail units to community service providers such as a dentist, a physiotherapist and a pharmacy as well as redeveloping part of the Centre to incorporate a brand new, high-quality, childcare facility,” says Williams.

“These initial changes have already added value to the asset and will increase foot traffic for tenants as the local community’s needs are more closely met.”

Whatever tomorrow’s tenants want, we’re ready and able to deliver.

Read this article and other stories from the country's leading investment and commercial minds in our free 24-page 2018 Commercial Property ThinkBook.

Read more in our Commercial Property ThinkBook.

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