OPINION - Adam Copland

Reflection and Progression – 2023

It’s that time of the year again when we look back to reflect on the year that has passed and take time to plan for how we should move forward.

Looking back, I can genuinely say it has been the toughest year of my career. The uncertainties we have faced with the election, multiple wars raging, rising interest rates and the associated issues this has caused in the commercial property market continue to challenge us. We are under no illusion that many of you have been dealing with the same challenges. It's been an environment that has required us all to make many hard decisions without any certainty of what the future holds.

The Boards of our various property ownership groups have been faced with these same challenges. We acknowledge and thank you all for the time and genuine good faith that has been shown in dealing with the issues that have arisen. When the market is good, it's easy to look good. It requires much more skill, expertise and problem-solving ability when the market is in its current state.

The key thing we will take from the events of the last year and the years prior is the learnings and experience we have gained and how that will be factored into our approach going forward. These learnings are in relation to all aspects of where we look for value in property, to name a few:

• Industry sectors and locations we thought were resilient and recession-proof have proved that in times of change, they will also be affected.
• Our approach to debt funding will be refined to ensure we guard ourselves against the issues that have arisen over the past 24 months.
• No matter how long you’ve been in the industry, the losses hurt. This year, we’ve had a few things not go our way, and it hurts. We feel the hurt with every investor, and that never gets any easier, and the resolve to be better gets stronger.
• Diversification has proved again that it is critical.
• It’s important to have a sale strategy for all assets, and if we receive an offer that seems too good to be true, we should take it.
• The market will change; we do not know when or why, but we will ensure we plan as best we can for all eventualities.

Looking forward, we are not going to try to predict the future. The market is certainly down, it could be at or near the bottom, but we are of the view that it will be here for a while. In previous cycles, there has been a lag effect for how commercial property has responded, and we cannot see anything to suggest this cycle will be different. What we do know is that in previous cycles, those who have taken the risk in these types of markets have benefited from the upside. With that in mind, we will continue to look for value in the market, and if we find it, we will present it to you to give you an option to enter if you wish.

As a final musing, it wouldn’t be an article reflecting on 2023 without referring to interest rates. In August 2021, our Reserve Bank kept the OCR on hold at 0.25%. In October 2021, many of our expert economists were still predicting interest rates would be “lower for longer”. In November 2022 - only 13 months later - our OCR was at 4.25%. Based on what we are seeing in the market, I’m finding it hard to rely on the current expert market commentary that interest rates will be “higher for longer”, and I certainly hope that commentary proves to be wrong.

I wish everyone a very merry Christmas and an enjoyable festive season. Kick back, relax and recoup for a while because 2024 will no doubt have more challenges to throw at us.