Commercial property investors demand greater market analysis in cautious economic climate

A more cautious approach by investors has resulted in a slowing down of investment sales activity in the commercial and industrial property market this year, according to the head of New Zealand’s leading commercial and industrial real estate agency.

Bayleys Real Estate managing director Mike Bayley says potential purchasers have become more analytical in the way they approach transactions, and are taking more time to undertake due diligence on properties they are interested in.

Mike Bayleys said this contrasted with the boom years of the mid 2000s when purchasing decisions were often made on a more intuitive and a ‘seat of the pants’ basis in a faster moving market.

“Information is king in the new investment environment and both real estate agencies and salespeople are having to adapt to a different way of doing business,” says Mike Bayley in the company’s just-released Total Property magazine.

“Greater emphasis is being placed on the type and quality of information that property owners and their agents are able to supply to investors - and often their financiers - to assist them in their decision making.

“This demand for information also continues after a property acquisition has been made, as purchasers look to maximise their return on investment throughout the life cycle of their ownership.”

Mike Bayley says Bayleys had recognised this shift by expanding the non-agency property services that are now available to clients.

“For example, Bayleys’ property management division, which provides asset and facilities management services, has been one of the fastest growing sectors of our business over the last two years and it now has a portfolio of more than $1 billion worth of commercial and industrial property under management,” he said.

“One of its key focuses in a more challenging market has been on tenant retention - with comprehensive programmes put in place to assist property owners in the vital relationship with tenants.”

Earlier this year, Bayleys also moved to increase the strength of its valuations and consultancy services, recruiting a number of New Zealand’s most experienced and senior valuers to operate out of a new Bayleys Valuations office in Wellington.

“Again this has been about assisting investors to get the best possible return post purchase from their property, plant and machinery assets,” he said.

Mike Bayley says it is now clearly evident that the growth curve for New Zealand’s economic recovery will be gradual rather than at the brisk pace predicted by many economists at the beginning of the year.

“Deleveraging continues at both a corporate and household level – taking a large slice of credit and spending capacity out of the domestic economy, including the discretionary housing market and the commercial and industrial property investment sectors,” he said.

“Over the medium to long-term, this restructuring now of debt/equity ratios will position companies and individuals to move forward on much firmer and sounder financial footing.”

Bayleys last Total Property magazine for the year features more than 90 commercial and industrial properties it is marketing around New Zealand - from Warkworth to Invercargill. More than 20 retail, office and industrial properties featured in the magazine will be auctioned in Bayleys Auckland auction rooms from 11am on December 8.