Commercial Property - Very Little For Sale.

[SwissKiwi]

Hi all,

There seems to be a lack of listings currently of quality (not run down) industrial properties with tenants around the 1mill$ mark - or at any mark really.

Looks like people are holding onto these now.

Wondering what everyone else is seeing in this market?

SK

[Davo36]

SK, yep see the exact same thing.

Basically it's very hard to buy any sort of tenanted commercial property (especially industrial) at any sort of decent return just now.

I think, as you speculate, people are holding on to them.

Gotta say if I had good quality industrial property right now, I'd be doing the same.

Even the vacant stuff is well overpriced in my opinion.

[SwissKiwi]

So given this situation - what's the play?

I'm talking to agents about their good quality empty properties - where if we can do a simultaneous sale and lease - a deal can be done.

I dont see this as a high hit rate strategy - but worth a try - keep talking to everyone.

Otherwise do we rest on our laurels - sit back on our current holdings and ride the next upswing?

Seems too passive for me.

[eri]

doesn't seem too passive to Davo...

[Davo36]

Well, I don't really want to have to do that, but what choice is there?

If you just can't buy at reasonable returns, they only thing to do is not buy.

Frustrating.

I'd love to hear alternatives...

[Wayne]

Even the vacant stuff is well overpriced in my opinion.

The vacant stuff seems to be priced as if it were tenanted

[Davo36]

Yep, that is actually what I meant, you put it better.

Vacant, rundown, no parking, earthquake risk, doesn't matter, all seems to be dear.

[DaveW]

I'm going to wait till the winter months to buy a vacant or semi vacant industrial. I won't rule out other property types.

[Wayne]

What are peoples thoughts on property Syndicates?

[SwissKiwi]

Was sent a well leased industrial property in Penrose at the weekend - but @ 7.2% net it's too dear.

Going to take a look at what is happening in Tauranga.

[Davo36]

SK, good luck.

Let us know how it goes?

[Davo36]

I'm going to wait till the winter months to buy a vacant or semi vacant industrial. I won't rule out other property types.

DaveW, do you reckon you'll get a better deal in winter?

[DaveW]

There are always deals to be made. They are not going to come knocking on your door, you have to create them.

Yes I agree CAP rates are low on average but thats expected because bank rates are so low. Why put your money in the bank earning, is it 1%?, when you can buy a well tenanted industrial property with 7.2%.

[Davo36]

Yes but you can get 4 or 5% in the bank. No tenant hassles, no maintenance, no risk.

And if you are borrowing to buy the commercial property, you would be paying over 6%, so not much of a margin there.

So plenty of people are just holding cash right now.

The only problem I'd have doing that is that it might get inflated away. The US, the UK and others are going to have to inflate their way out of this mess. And when they do, cash will lose it's value very quickly.

[DaveW]

Exactly. 7.2% + rate of inflation, still beats 4 or 5% in the bank by a healthy margin. PLus there is the upside of increasing the value of the property.