If residential property yields are next to nothing then commercial yields aren't far behind

If residential property yields are next to nothing then commercial yields aren't far behind
The shops at 4034-4038 Great North Rd, Glen Eden.

The yields at Colliers latest commercial property auction dipped well below 4% with a property at Devonport on the North Shore achieving a yield of 3.6% and another at Avondale achieving 3.89%.

The yields on four shops in the same block at Glen Eden ranged from 4.68% to 7%, and Knight Frank sold a large industrial property at Papakura for $7.95 million.

See below for the details:

Commercial Properties Sold at Auction by Colliers International:

  • 4034 - 4038 Great North Rd, Glen Eden, west Auckland. A block of four retail shops (pictured at right) that were sold separately at auction: a 68.6 square metre shop leased to Bruce Lee Sushi, sold for $635,000 providing a yield of 4.68%; an 88.7 square metre premises leased to Pita Pit sold for $800,000 providing a yield of of 4.7%; a 124.5 square metre shop leased to Arum Cafe sold for $910,000 providing a yield of 5.5%; a 392.9 square metre premises leased to Snap Fitness sold for $1.825 million providing a yield of 7%.

Other Properties Auctioned by Colliers International included:

Recent Commercial Property Sales by Knight Frank:

  • 62 Hunua Rd and 2 Croskery Rd, Papakura. A large industrial property on two sites with a combined land area of 9903 square metres and building floor area of 5823 square metres. Sold for $7,950,000. The agents were Damon Wylie and Layne Harwood.

If you are interested in buying commercial property, interest.co.nz's commercial property database link has details of nearly 6,000 commercial properties that are listed for sale throughout the country.

To search the database, click on the property tab at the top of this page and then click on "Commercial properties for sale" from the drop down menu, or you can click on the link below:

You can find almost all commercial property for sale in our comprehensive nationwide listings which are searchable across any major type.
Find this free resource here.

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These yields are so low that they are exceptional. It maybe because they were bite- sized investments that might attract FTI's more interested in securing a trophy than an income stream.Another explanation could be that the rents were set so low that investors could see rises in the near future. Only more facts can give us the answers. Very small commercial investments tend to attract low yields. Regular commercial investments, say over $1M still hover around 5-10% depending on area and the tenant.

Big Daddy - surely the only way these commercial properties can increase in value, if they are subject to long term leases, is for the rents to increase? Many of the leases on properties being sold are linked to a small margin above CPI can't see big rent increases coming. Some of these leases never anticipated that the CPI could go negative! If interest rates do increase at some future point and the rental return is sub 4% it all seems a bit risky? Or are these commercials being purchased purely on spec related to future use/potential under the Proposed Unitary Plan? Also if you lose a tenant due to business failure you could go a long time without a rental income stream and then have to offer serious incentives in order to find a replacement tenant. Don't most banks require at least 40% deposit on a commercial purchase and are some now requiring P and I repayments? What's your take on my response Big Daddy?

This will all end in tears.
Stand by the big opportunities on there way.

What are you expecting, a quick dip and then a recovery?

The housing market have stop dead.Clearance rates at B&T was 25% Bayleys was under that on the North Shore last week.
The international buyers are out of the market as of 1 October.This is the only thing thats been pushing market for last two years.
Watch the headlines change Dec,Jan.
Big Dip has all ready started Sunnynook,Forrest Hill,Hillcrest all ready down 200k on the shore just the start.

All the above about to start with commercial property also.
Be patient be opportunities on there way in 6 months

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