Some investment advice from Bob Jones

Bob Jones gives some essential investment advice for those looking to invest in commercial?property in provincial towns.

Provincial towns world-wide are in steady decline. New Zealand is no exception. There are good reasons for that and they won?t change. A foremost one is tertiary education, now being enjoyed by more than 50% of our kids and rising. Take a student heading to Victoria University from say Hawera and living in the capital for 4 years, completing a degree. Even if pursuing a conventional career such as accounting, law or medicine, never in a million years will he or she then return to Hawera for reasons I hardly need to spell out.

The consequence of this is evident in our provincial towns today where you will now see the same faces portrayed 500 years ago by Bruegel in Flanders. Friendly coves to be sure but don?t expect scintillating discussion. So too in other western countries.

There?s another fail-safe test. If you can spot pretty girls over 20 or young blokes in suits in their late 20s to early 30s in a town then its current prospects remain hopeful. Otherwise, both categories have fled to the big cities. As a keen student of such matters, only Dunedin gets a tick, that is if one categorises it as a provincial city. Try finding a pretty girl over 20 or a young bloke in a suit in say Wanganui or Timaru and you will look in vain.

I’m sure there will be howls of outrage from Social Justice Bullies over those comments.

So, given the current negative trends, it?s not great advice to look to the provinces for commercial investment properties. You may ask what of a hot growth city such as Tauranga? But to buy what? Most offerings will be retail units? Again, taking a proper investment long view, buying retail isn?t smart. Currently, 10% of all retail sales are via the internet and that figure will continue to grow. That?s why the smart money is now exiting shopping centres while they still maintain a viable appearance.

A book that Bob Jones wrote long ago was about this precise problem. Back then his preferred avenue was industrial becuse tenants tend to fix issues for themselves. Retailers in small towns think they are the next Harrods and act that way, bringing annoyance to your passive investment.

Suburban shopping centres are also devastating High streets. In 1980 I was of the view that the best commercial property location growth-wise in New Zealand, was Hamilton?s main thoroughfare, Victoria Street. Now it?s a ghost town of empty shops, thanks to shopping centres.

Drive around any provincial town and aside from its prime centre it?s full of empty shops, their owners, judging by the buildings? dilapidated state, having long since abandoned hope of leasing them. One would be crazy to buy office space in small towns and only basic industrial units in prosperous cities such as Tauranga or Hamilton might hold their value. But industrial rents world-wide have been almost static for the past 15 years which hardly reflects great investing.

So what do you do?

So what should the mum and dad commercial property seekers do? I watch them flood into terrible office building propositions offered by syndicates, lured by the fool?s gold of leases. You can be assured if the buildings were worth buying then my company for starters would have bought them as it?s easier to sell them to a single quick cash buyer than a highly conditional syndicate purchaser.

All of this reflects a unique thing about our country and that is the public interest in commercial property investing. You won?t find that anywhere else in the world. Large American bookshelves will stock 50 or more books on property investment, but always solely about residential property.

In our rapidly changing world, nothing is very certain anymore and never more so than with commercial property. The failure rate in this activity and especially with developers is unmatched outside of restaurants. In short, it isn?t a field for amateurs.

What dear Bob is saying is that all the best properties to invest in will be already snapped up by people like him…leaving dogs. Buyer beware. I’d listen to Bob Jones any day over some flash harry advertising on NewstalkZB for an investment of just $1000 down and you could own xyz…