Dennis McMahon McMahon Commercial mcmahoncommercial

As we approach the end of another fairly difficult year, there are signs that the commercial property sector may finally be turning a corner.

At a recent Bayleys auction in Auckland, six tenanted retail properties sold at yields of below 7 per cent.

The Turners and Growers Building in Mount Wellington has just sold at a yield of 7.3 per cent whilst, locally, the property with Bridgestone tyres as a tenant in Mount Maunganui was sold by Bayleys at a yield of 7 per cent.

On the bigger transaction front, there has been some very significant transactions with the sale of the Call Plus Business Centre at 110 Symonds Street, Auckland by Bayleys at a price of $26 million whilst Sir Robert Jones has been adding to his portfolio with the purchase of yet another office building on Auckland's North Shore.

The property at 5-7 Byron Ave; Takapuna is mainly occupied by the IRD and is his third office building on the Shore.

At the leasing level, there is no question that inquiry and activity has picked up. From our own point of view, we have more inquiries on vacant space in the last month than the rest of the year as a whole.

So, what does this all mean for the commercial property sector? In simple terms, it would appear as though two major trends are currently emerging.

Firstly, there is such a weight of capital out there trying to find a safe home and do better than the miserly returns from bank deposits. It would appear as if many investors are saying that they perceive that we have reached the bottom of the property cycle and are wanting to get in before there are any real signs of a major recovery taking place.

Secondly, many tenants i.e. businesses are also recognising that the days of desperate landlords offering significant rental discounts and free fit-outs may be coming to an end as vacancy levels across all sectors show real signs of stabilising.

Accordingly, they are looking to relocate and reposition themselves on advantageous terms before the market hardens.

To be fair, it has been a tenant's market since 2008 and it was time for a rebalancing of market conditions.

I believe that we are still some way off a full recovery but current trends certainly cause for some optimism.