Financial markets may be in meltdown but there was competitive bidding at Bayleys' latest commercial property auction

Financial markets may be in meltdown but there was competitive bidding at Bayleys' latest commercial property auction
This dairy premises in Henderson sold for $522,000 giving its new owners a net yield of 5.79%.

Coronavirus be damned!

Talk of a possible recession? Bunkum!

That was the attitude of investors at Bayleys' latest commercial property auction.

It was a big auction too with more than two dozen properties on the Order of Sale.

That was matched by a correspondingly big turnout by potential buyers, with not a face mask in sight.

And they weren't shy with their bidding either.

Of the 26 properties that were to be offered, one was sold prior to auction and one was withdrawn from sale, leaving 24 to go under the hammer.

Most were small to medium sized commercial properties of the sort that are popular with private investors and bidding on most of them was competitive.

Sales were achieved on 15 of the 24 that were offered, giving a clearance rate of 63%.

Of those, six achieved yields of more than 5%, four had yields between 4% and 5%, two had yields under 4% and three were sold with vacant possession.

The highest price on the day was $3.5 million for a vacant 566 square metre refurbished character building in Newmarket, while the lowest price was $522,000 for a 96 square metre retail unit in Henderson, which provided a net yield of 4.98%.

Details and photographs of all the properties offered at the auction, including the prices and yields achieved, are available on our Commercial Property Sales page.

The comment stream on this story is now closed.

You can receive all of our property articles automatically by subscribing to our free email Property Newsletter. This will deliver all of our property-related articles, including auction results and interest rate updates, directly to your in-box 3-5 times a week. We don't share your details with third parties and you can unsubscribe at any time. To subscribe just click on this link, scroll down to "Property email newsletter" and enter your email address.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

32 Comments

the dairy looked like a good investment,what would the rates be there?

Tenant pays the rates under a net rent lease.

I think most commentators on a property section would know that,how much was my question.

Most commentators on the property section would use the council website to find rates instead of asking for an amount here.

https://www.aucklandcouncil.govt.nz/property-rates-valuations/pages/find...

thanks for that link,looks like sale price was 545,000,rates are just over 3000 dollars,easy to understand why those dairies have to work long hours,the first couple hundred dollars a day turnover goes to pay the landlord,council and insurance cos.

LL. You said "good investment", followed by how much the rates. If those two concepts of viable investment and associated cost were not linked in your statement I apologise for not realizing that you know that and upsetting you.

I went to Ray White Ponsonbys residential auction on Wednesdays to get an idea if things were slowing down. 14 houses on offer, 2 sold prior, 9 sold at auction = 78% clearance rate. One old house at 11 Wood St started with a low bid of $2.0 M, I estimated it could sell in the high $2M, the bidding just kept going & going, it sold for an unbelievable $3.71M

That's not slowing down, excellent analysis. Whats your take on the percentages above and below CV.

Hi Yvil,

Well done for being pro-active and getting out into the marketplace.

Unsurprisingly, there are very few DGM posting on this thread.......

TTP

Did you actually view the property (11 Wood St) ?

Yes, quite large (for Ponsonby), 2 car garage (rare for Ponsonby as well), some views onto the sky tower but dated condition (kitchen, bathrooms etc vey old)

Interesting. I'm not familiar with prices in that area but I know there have been plenty of sales in Remuera in that price range over the last 6 months. I guess the bidders were all well aware of how rare such a block is in that area. I wonder if they're going to live in it, or develop it...

To be fair, Wood Street is in Freemans Bay - not Ponsonby.

Freemans Bay is more exclusive/expensive than Ponsonby.

But both are choice suburbs....... I can understand why top prices are being achieved easily.

TTP

Excellent ! - the RE positive commercial productivity stat is what we need apart from this irrelevant world DGM news circulating, even the PM just announced the new ban measures.. what a 'herd mentality'. NZ should not cave in to this Covid19, have to say it as bad news being spread by SosMed platform, try to slow down the positive business transactions, lucky in today's world we have an online purchase option. Plenty of Covid19 ex victims - now realised that NZ is the only safe haven country to buy property and automatically allow the buyer to settle here. Park your money here folks! - world money will pour soon to NZ, escaping the havoc somewhere else. Predicted the RE soon will go up, up and up !

Coronavirus be damned.....

Thats what stock market was saying just 3 weeks before......

At last, someone talking sense.

Investors buying commercial property at yields of 5% and below obviously have no understanding of risk; including that associated with coronavirus.

Coronavirus is doing nothing for peoples confidence, and people lacking confidence don't spend the same money they use to. This means businesses don't receive the same level of business, to pay their rent and staff. An extended period of this contraction will force people out of business, which is reflected in increased vacancy of commercial rent. The smart landlords will at the very least give their tenants a rent holiday or postponement. Unlike house, to relet commercial premises it can take 3 months and sometimes years to fill the vacancy. In addition, with increased vacancy comes reduced rent as supply of premises exceeds demand.

Property prices are not immune to falls, and my money is on a haircut all round as the impact of coronavirus become more obvious.

Might be time the banks took a haircut as well, as they front left and centre to creating this property price ponzi scheme in the first place. The majority of wages dont support this ponzi scheme, and its time government stopped subsidising these overseas parasites with accommodation supplements. Best thing the government could do (in this time) is encourage people to shop local, and legislate the portability of bank account numbers; just like they did with phone number portability. to ease change in cartel providers.

Yep, focus on keeping a good and solvent tenant.

"Best thing the government could do .. is legislate the portability of bank account numbers; just like they did with phone number portability"

I very much like this idea

As for comm property yields they could tighten (go down) a bit with falling int rates

"it can take 3 months and sometimes years to fill the vacancy. In addition, with increased vacancy comes reduced rent as supply of premises exceeds demand."

Was recently in a city overseas where the economy is currently in a recession. Some retail space has been vacant for many years.

Low interest rate World, driving returns on real stuff like property, TD's and Equities falling with no floor insite, even gold is flaky, money needs a home, a 4% return is the new 10%, owning something real and physical like property even though it's value can/will vary will always have a value and return.

Exactly, real estate appears to be the new gold in so far as hedging against the devaluation of the dollar goes.

So it's a bit like money laundering via casinos or lotto.
You just throw the money at it knowing you'll get something legit in return and not be left with nothing?

For real long term investor - Stock market is and going to present excellent opportunities not to be missed unless someone believes that the world is doom by corona virus

You buying stocks or indexes

As far as I am aware commercial property is not subject to overseas investor limitations? How much influence is that having on pricing ?

.

Don't give up our way of life to this terrorism & Covid19 bug - If we give up our way of Democratic lives then terrorist win, the bug will win too. This principalities can be drawn from the pro-gun lobbyist after Chch killings, most of them agreed that ban/giving up this semi-autos, means the terrorist win.. they made us scared! Then create this knee jerk herd 'Ban' mentality - NO We Are Not Scared Of Them! - we shall fight this. Leave everything Business As Usual, even Temp ban means that We surrender to terror demand. Stand Up NZ - Don't let them win this mind battle.

Sorry folks but the sales for property in NZ figures are rear view mirror stuff.
Most contracts will have been entered into (6-8 weeks pre settlement) in mid Januaury or earlier.
ie B4 China told us what was going on re virus.
So, surge in sales in February (versus a low base comparison in Feb 19) was PEAK and will not recur for over a year minimum.
Market runs on confidence v fear.
For anyone who doubts that fear will be taking over in next few weeks, then you do not understand how psychology drives stats.

lending based on credit risk assessment.
Right now, high yield credit and bank stocks are getting massacred.
Meanwhile commentators on housing seem blissfuly unaware that all credit givers will be revising their models and LESS credit will be result.
Plus less earnings to service debt = more default.
Time to wake up folks.
Marginal affordability and any on excessive leverage is going to take the hit.
And everyone has been handing credit to FHB for 6m.
When equity declines (and it WILL) guess who will not be told off for all that dodgy lending they were all gungho about only a month ago???

Many people who have invested into commercial property in the last few years may find that they did so at or near the peak in a few years ...

Beware the winner's curse ...

This is total crap BS from you CN you just trying to cast a shadow on what has been good. Is it because of envy? Yes there are exceptions and some investors who have a bad experience. Apart from that comm property has been highly highly successful.

Congratulations to you on having made successful investments in commercial property. Yes, commercial property prices have provided good returns in recent years. And that may have resulted in the formation of return expectations for the future by many commercial property investors. Future returns should not be based on looking in the rear view mirror but focusing on the windscreen and what is ahead. What has been good in the recent past, does not stay good into the future - that is the nature of business cycles.

The future looks like there will be economic headwinds in New Zealand and many are unable to see the economic headwinds coming . Economic headwinds typically result in business casualties, many of which who are tenants in commercial real estate.

There are some sectors of the economy where the businesses are already on life support as they have had a significant fall in revenues and are now bleeding cash. The signs are there for those tuned into it.

Some prices paid for commercial real estate recently have simply been too high.

No envy, just economic reality.