Bayleys sold 75% of the commercial properties they took to auction this week, and Colliers International had a 100% success rate at their commercial property auction in the Bay of Plenty.
All of the properties offered at Bayleys auction were small to medium sized units that would be likely appeal to private investors. Sixteen were located in Auckland with one each in Napier and Whanganui.
The cheapest Auckland property to sell was a 110 square metre light industrial unit in the Wairau valley which went for $476,000. The most expensive was an old villa on Parnell Rd which had been converted to office use. It's zoning would allow the site to be redeveloped for apartments or terraced housing. It sold for $3.525 million.
The highest yield of 7.55% was achieved on a retail premises in Whanganui which was leased to NZ Post and sold for $2.73 million.
The highest yield achieved on the Auckland properties was 6.09% for a commercial premises leased to a fitness centre in Albany, which sold for $2.585 million.
The lowest yield was 3.09% on a retail premises in Blockhouse Bay.
At Colliers' Tauranga auction, all five commercial properties offered were sold for a combined value of $10.9 million.
Prices ranged from $1.25 million for 307 square metre bar and restaurant in Taupo which provided a yield of 6.8%, to $2.85 million for a 1311 square metre supermarket on a 2016 site, which was leased to Countdown. It provided a yield of 7.4% for its new owner.
Colliers International Tauranga Managing Director Simon Clark said the results sent a clear message that the market remained buoyant.
The fulls results from both auctions, with the prices achieved and photos and full descriptions of all properties, including those that didn't sell, are available on our Auction/Sales Results page.
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23 Comments
Who would buy residential when commercial net returns and capital gain are so much better?
Not to mention no Tenancy Tribunal, no bond restrictions, no LVR regulations, no bright line rules, no internal up keep, no management costs, no rates, no insurance, no water, no Body Corp fees etc as the tenant pays the lot.
Many small commercials are less than half the price of an Auckland house.
The obsession with residential investment is hard to fathom.
Yes I do have commercial and when you understand how it works it beats residential every time.
To understand commercial, you have to understand that a commercial property is a business and it is valued on how good the "stock" is, how good the strength of the cash flow is pius a myriad of other things. The best insurance against vacancies is to own small commercials for which there is an endless supply of tenants waiting, or have multiple tenancies in the same building so if one becomes vacant its no drama. Commercial is so different from residential it's like chalk and cheese so needs study and teaching as its not taught in universities. Residential has had a good capital gain run, but hopeless cash returns and its halcion days are slowly coming to a close either through market forces, or political pressure determined to reign it in. The IRD, Reserve Bank and the politicians have big teeth and will use them.
You should probably keep mum about commercial property as there will be a big rush to purchase it if everyone finds out and yields would lower.
Another consideration with commercial is when there is an economic downturn. Small business tenants could dry up.
Another question, do you have any residential investments?
In all the down turns i have been through small commercials ( panel beaters, electricians, basic shops etc) were never affected. Don't been fooled by those who boast about owing mega towers worth hundreds of millions. You get exactly the same returns ( and spread the risk) by ending up with a portfolio of many small investments. There is no difference between owing 10 x $1M commercial properties and one $10M property,
BigDaddy, would it make sense for a young person to buy a small industrial unit to start their property portfolio? Like this one:
The cheapest Auckland property to sell was a 110 square metre light industrial unit in the Wairau valley which went for $476,000.
Is the interest rate higher for commercial property? I wonder how the banks would feel lending to a young man or woman who had 100K deposit for such a property. It would seem like it could be a good strategy.
Ha. I have had commercial and residential now for 25 years. I am happy with my investments but In the last five years or so it has been better to buy residential. The rent growth and capital growth on all the commercials from Wellington CBD to provincial small scale industrial through to retail has been poor to terrible.
Big Daddy, Yes commercial or industrial can be better for investors but as you know he Banks haven been lending as much on them.
You also need to be selective in what you purchase as there are lemons in the commercial field.
I have a warehouse/office commercial and with a nett yield of 15 per cent on purchase price so obviously more than pleased.
However, the yields achieved at the above auctions I wouldn't say were that fantastic as you can achieve far higher returns on residential in Christchurch, however there is more work required.
You can probably get lunch bars or small units in shopping complexes for that price. here is an example:
http://www.trademe.co.nz/property/commercial-property-for-sale/auction-…
Something more substatntial
http://www.trademe.co.nz/property/commercial-property-for-sale/auction-…
Building is 586m2 on over 850m2.
Borrowed the lot a few years back on existing property security, and same tenant still there.
Generally the deposit required is 40 to 50 per cent but depends on buyers equity in other landed securities.
Great buys in commercial are few and far between nowadays but there are ways of increasing value.
Doubt whether you would get much for under 300k, might in small towns.
I enjoyed this article on zerohedge http://www.zerohedge.com/news/2017-03-07/next-domino-fall-commercial-re…
We are buying online, working remotely and having dinner delivered. Maybe, in a few years we won't need panel beaters and mechanics.
What are these industries that are going to drive growth in commercial RE?
Multi tenant Commercial would beat residential, whether single or multi family ( apartment block) investment. The difference between the two can be compared to returns from bank deposits and that of returns from a growth company. Nothing wrong in investing in both but commercial would come out top as all outgoings are at tenants care. Multi tenancy splits your risks, making it s better investment.
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