It’s fair to say that investors’ cups are not exactly overflowing right now, but there are several factors that will define whether they are half full or half empty.

Coming from a commercial property perspective, PMG Funds’ Scott McKenzie is firmly in the former camp – although he acknowledges more might be spilled as we navigate further bumps in the road ahead.

PMG and McKenzie have been here before. In the firm’s 30-year history, they’ve ridden out their fair share of challenging times, and he sees some significant differences today from the last big shock, the global financial crisis of 2008.

“This time around the commercial property sector, particularly at the quality end, is in a pretty good space,” he says. “Back then, vacancy was quite high whereas now we’re sitting at sub-4 per cent for industrial property across our three major metropolitan centres, and there’s enduring demand for quality office space and large format retail.”

“Furthermore, with rising construction and borrowing costs seeing new projects deferred or abandoned, ongoing demand against limited supply is placing continual upward pressure on rents. For owners of and investors in quality property, this offers greater resilience in terms of cashflow to offset the softening of values.”

Most market commentators have characterised the current economic environment as a recession of supply, not demand. The harsh reality of this is that, while individual businesses may fall by the wayside, demand for quality premises will remain.

As both fund manager and property manager, PMG is focused on supporting the needs and expectations of its tenants and its investors through these tougher times – and has been preparing for this for some time.Scott McKenzie, CEO PMG/Photo Supplied.

“We’ve long employed a strategy of hedging and conservative borrowing that has limited our exposure to interest rate fluctuations. This has allowed us to hold back the immediate hit of the unprecedented interest rate rises we’ve seen over the last year,” McKenzie says.

 “Diversification has also been a key ally in getting through these tougher times. Being able to spread risk across a diverse portfolio, rather than have all your eggs in one basket, makes it easier for a fund to remain more resilient if a particular tenant or property faces difficulty.

“Wherever possible, as a property partner of choice, we seek to help our tenants sustain their business through these tougher times – and it’s in these instances that our investors feel the benefit of the resilience of income from a portfolio, rather than exposure to a single property.”

While confidence in their ability to see past the current challenges is one thing, it’s the emerging opportunities that are behind McKenzie’s glass half full approach to the year.

“The slowing economic environment provides an opportunity to secure high-quality commercial real estate at better value than has been available for some time, and therefore grow our fund portfolios to ultimately provide greater income resilience for our investors.”


“So without losing sight of our core commitment to our tenants and investors through maintaining the performance of our existing portfolio, we’re making a number of opportunities available to wholesale investors where we can secure quality property and generate value. Typically, these opportunities have a higher level of risk attached, matched by the potential for a higher level of return.”

“The design of this is to look at how we use the opportunity now to acquire this high-quality real estate to ultimately pass this through to our retail funds and grow value for our unit shareholders over time.”

Join PMG for an exclusive online panel session on Thursday, 27 July and learn more about key topics shaping the world of CRE, including tax, economics and unique investment opportunities within CRE for astute investors in 2023.

Register your interest at pmgfunds.co.nz/investment-partner

Disclaimer: The information in this article is of a general nature and was current at Tuesday, 18 July 2023. It is not intended to be regulated financial advice for the purpose of the Financial Markets Conduct Act 2013 and does not take your individual circumstances and financial situation into account. PMG does not provide financial advice. Please seek advice from a licenced financial advice provider before making any investment decisions.

Any wholesale investment opportunities referred to by PMG are not intended to and do not constitute an offer of a financial product, unless explicitly stated as such and supported by a current disclosure document. Any wholesale offers that are made will only be open to persons who fall within the exclusions applicable to offers made to Wholesale Investors as set out in Schedule 1, clause 3 of the Financial Markets Conduct Act 2013 (or to any other person to whom an exclusion applies under Schedule 1 of that act).