AUCTIONS are again the preferred selling process for commercial property as vendors try to exercise control over settlement dates and price.
In a market where the gap between the expectations of buyers and sellers is widening, drawn out expression-of-interest campaigns are losing their appeal.
Agents say that properties at prices across the range are not shifting as quickly as a year ago, mainly due to the stalemate between buyers and sellers.
This is due to uncertainty over how the local economy will be affected by the eurozone crisis and an overall more cautious approach among buyers. Overseas investors remain attracted to the market but are driving a hard bargain.
There is also a belief that vendors are demanding too high a price, the result of needing to service debt taken on in the pre-financial crisis bull market.
There are a range of sites on the market that are good quality assets but are yet to find a buyer at the price expected by the vendor. The disparity between values is growing ever wider.
These sites include 146 and 140 Arthur Street, North Sydney, and 100 Christie Street, also in North Sydney, among many others.
The national director and head of capital transactions at Knight Frank, James Parry, said it was a two-tiered market, where some deals were on the cusp of completion and others were dragging on over a year or more.
"These are all very good assets but they have been on the market for some time as the gap between the vendor and the buyer's price expectations is not narrowing," Mr Parry said. "In the institutional-grade market valuations appear more realistic, but in the suburban sectors, the vendors and the buyers are not willing to budge. That has led to a quiet few months for transactions."
Mr Parry said he expected the stalemate to ease in the lead-up to Christmas as buyers look to swap out of stocks into property.
Anthony Bray, the director of sales and investments at Jones Lang LaSalle, said he had also seen a rise in demand for auctions.
"The process has come back into vogue and we are telling clients it is the best method to control the sales process in terms of the price and timing," he said.
"It gives the sale a definite end date and allows the market to determine the price, as the gap between price expectation of vendors and buyers is still large."
Despite the price issues, DTZ Investment's head of Australia research, Dominic Brown, said the local market remained a target for foreign investors pursuing comparatively high yields and strong property fundamentals.
"That translated into a 25 per cent increase in the number of deals in Australia in the second quarter," he said.
Frequently Asked Questions about this Article…
Why are auctions becoming the preferred selling process for commercial property?
Agents in the article say auctions are back in favour because they give vendors more control over settlement dates and price. Auctions provide a definite end date and let the market determine value, which helps when the gap between buyer and seller price expectations is wide.
What is happening to expression-of-interest campaigns in the current commercial property market?
The article reports that drawn-out expression-of-interest campaigns are losing appeal. With increasing caution among buyers and a widening gap between vendor and buyer price expectations, agents say longer EOI processes aren’t shifting properties as quickly as they used to.
How are buyers and sellers influencing transaction speed and pricing in commercial property?
Buyers are taking a more cautious approach—partly due to global uncertainty—while some vendors are holding out for higher prices to service pre-crisis debt. That stalemate has slowed transactions, especially in suburban sectors where both sides are unwilling to budge.
Are overseas or foreign investors still active in the Australian commercial property market?
Yes. The article notes that overseas investors remain attracted to the market and are targeting Australia for relatively high yields and strong property fundamentals, although they are often driving a hard bargain on price.
What did Knight Frank say about the current state of the commercial property market?
James Parry, national director and head of capital transactions at Knight Frank, described it as a two‑tiered market: some deals are close to completion while others have dragged on for a year or more because vendor and buyer price expectations aren’t narrowing.
Will the stalemate between buyers and sellers ease soon, and why?
James Parry expected the stalemate to ease in the lead-up to Christmas, suggesting buyers might look to rotate out of stocks and into property, which could increase activity and narrow the price gap.
Which sales method do Jones Lang LaSalle recommend and why?
Anthony Bray from Jones Lang LaSalle said auctions have come back into vogue and advised clients that auctions are the best method to control price and timing, because they create a definite sale end date and allow the market to set the price.
Has foreign investor activity translated into more deals in Australia recently?
According to Dominic Brown, head of Australia research at DTZ Investment, foreign investor interest translated into a 25 per cent increase in the number of deals in Australia in the second quarter, reflecting demand for higher yields and strong fundamentals.
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