31/01/2006 - 21:00

Commercial sales going off-market

31/01/2006 - 21:00

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A market increase in the number of commercial sales conducted off-market is a noticeable feature of the recent profusion of activity in this sector of the market.

A market increase in the number of commercial sales conducted off-market is a noticeable feature of the recent profusion of activity in this sector of the market.

But by not putting properties through the open market process, however, vendors may not be achieving the best price for their asset – undoubtedly a high priority for all sellers.

So why are vendors choosing the off-market model?

The main reason seems to be discretion. Private companies in particular do not wish to receive the attention and scrutiny inevitably associated with a big sale.

But it’s not just private companies choosing the off-market route but also super funds and listed trusts.

Jones Lang LaSalle director of sales and investments John Williams told WA Business News there was no doubt the prices being achieved in the current market were very good.

“If people are comfortable with the prices, there is nothing wrong with off-market transactions, but you will only ever know the maximum price that could be achieved if you undertake the formal process,” Mr Williams said.

Savills WA director for investment sales, Miles Rowe said vendors were achieving close to the best price possible in off-market sales.

“People who own commercial property generally know their market and have a good handle on the asset,” he said. “A lot of people don’t want to go down the public sales route; they might squeeze another couple of per cent on a sale, but it is more of a hassle, and some people and companies chose to conduct their business in a private way.”

Mr Rowe said some companies with probity issues were better advised to use the public sale route to ensure their shareholders received the best price outcome.

For smaller commercial investors, the trend to sell premium high-yield commercial property in off-market deals is potentially costing vendors thousands, according to RE/MAX commercial sales associate Pasquale Cianfagna.

“With the shortage of premium commercial properties on the Perth market, the competition is guaranteeing profitable seller returns, however, a lot of commercial properties are not even being listed,” Mr Cianfagna said.

“An increasing number of investors are choosing commercial over residential investments and the commercial market is seeing more ‘mum and dad’ investors channelling their superannuation into office and industrial space.

“It is without doubt a seller’s market and there are a lot more people out there wanting to spend $1 million to $2 million, but cannot find reasonable property with the right investment potential.”

He said that, in the current market, a tender or auction should get a higher return, but many vendors were not taking advantage of the market conditions.

 “We believe the smart property owner would look at the many sales options available in the current market environment and aim to achieve the best possible price for their property through strategic marketing and negotiations,” Mr Cianfagna said.

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