Why now is the time to invest in commercial property

Kiwis have long favoured residential property investment as a means of securing their financial future, believing that it’s “as safe as houses” and nothing can ever go wrong. Now, however, buying a house as an investment has climbed beyond the reach of many as prices have continued to soar.

That does not mean that you have to give up on property, however; the commercial property sector is well worth exploring as an alternative to hands-on residential property or as part of a balanced portfolio, as well as shares or managed funds.

With investment opportunities starting from $10,000 and cash distributions of 4.3 per cent per annum based on the current unit price (as at 1 March 2022), payable monthly, the Oyster Direct Property Fund is a shining example of why commercial property is an attractive option for investors and offers significant advantages.

“We are regularly hearing from investors seeking quality investments which generate a monthly income and potential for capital gain,” says Rich Lyons, retail investment manager for Oyster.

Lyons points out that regular monthly income and an emphasis on investment stability are big drawcards.

“Commercial property has proved to be resilient during periods of major economic instability including Covid-19 and, generally, isn’t subject to the same sentiment-based volatility investors can experience in the share market.”

Oyster has been in business for more than 20 years and is well-regarded in the industry, having built in excess of $2.1 billion in assets under management.

The group purchases quality properties of significant scale in the office, industrial, and large format retail sectors, which are managed by a team of dedicated in-house property managers. Properties such as supermarkets and DIY stores can stay productive even in tough times and weather the storm, offering a stable investment and comfort for investors.

For example, while small retail had to shut their doors throughout Covid-19 lockdowns, supermarkets remained open for business, while DIY stores continued to provide click-and-collect services, says Lyons.

Oyster has a robust buying strategy, and strict criteria, looking for commercial properties that are located in sought-after locations, close to airports and state highways, where appropriately zoned land is in tight supply.

“Our overall investment philosophy is to target quality commercial property that has enduring occupier demand, is well located and close to amenities, and has reputable tenants,” says Lyons.

Oyster offers three key funds: The Oyster Direct Property Fund, with a minimum investment of $10,000 and a diversified commercial property portfolio; Oyster Industrial, launched in 2019, which is available when acquiring new property, with a minimum investment generally around $50,000-$60,000 and Oyster Large Format Retail Fund, with a focus on supermarkets and DIY stores and a minimum investment of $50,000.

Auckland investor Allan Faull says the Oyster Direct Property Fund was ideal. “We couldn’t afford to invest in a commercial property by ourselves, but Oyster provided a path into investing in a share of its portfolio.

“The team’s expertise in purchasing quality commercial property has given us a chance to receive regular returns,” Faull says.

“As well as investing into Oyster’s Direct Property Fund, we are also reinvesting our monthly returns to grow our wealth. As it’s a PIE fund, there are tax advantages too.

“Oyster offers excellent investment opportunities that achieve very good returns. They have fulfilled all our expectations.”

Faull says transparent monthly reports and personal service are other key benefits. “We are not just a number but a real member of their investment team.”

Nikki Sutton, also from Auckland, says she wanted higher returns than a bank deposit, but was relatively risk averse and wanted security.

She says diversification—spreading the risk over multiple properties, tenants, and funds—felt safer. She also describes the experience of investing with Oyster as excellent. “Nothing is too much trouble and they take the time to make sure things are explained in plain English.

“Having sold our business, we are currently enjoying some downtime not working before we decide what’s next and the regular monthly returns we’ve seen from our investment in the Oyster Direct Property Fund have been critical,” Sutton says.

“It’s helped massively with budgeting – to have a set amount going into our account to work with each month gives us peace of mind and leaves us free to enjoy this next chapter in our lives. “We’ve also set up a couple of small investments with Oyster where we reinvest the monthly return, which will be a nice bonus when we come to draw down on those funds given the compounding returns.”