Dennis McMahon McMahon Commercial www.mcmahoncommercial.co.nz/

Hi everyone - it's good to be back after an unfortunate skiing accident two months ago...
The last two years have arguably been the toughest I have witnessed in 25 years in the property industry.

The commercial property market does not function in isolation to the general economy or global trends and this has never been more evident than in recent times.
The global financial crisis saw banks stop lending for a period and public confidence plummet to new lows. Trading conditions quickly became difficult with industrial, commercial and retail property all being hit hard by tenants going into receivership and increasing vacancy levels.
The good news to emerge from all of this is that, even in a mortgagee situation property continued to at least retain its basic underlying value underpinned by land and bricks and mortar. This stands in stark contrast to the thousands of people who had invested in the finance company sector and who were left with literally nothing in the way of assets at the end of the day.
Indeed, a recent report released by the Property Council and Investment Property Databank (IPD) shows that investment in industrial, office and retail in New Zealand produced an average annual total return of 10.8 per cent from 1994 to 2009. This was 40 per cent better than bonds and equities for the same period.
Our own experience of secondary sales of shares in our syndicated portfolio shows average total returns of between 14-16 per cent for the same period.
So commercial property is still and always will be a sound, long-term store of wealth. As with equities, there will always be times of volatility and this is where diversification in any investment class comes into play. The syndicated approach enables diversification to occur at a level where, in bad times, you are not completely exposed to one property whilst, in good times, you can reap the benefit of a reasonable capital gain because of the level of investment required for most syndication schemes (generally $50,000 to 100,000).
The general consensus among market commentators is that the industrial sector is heading into recovery whilst office and retail have a long way to go. In such times, the quality of management of the properties is paramount in terms of tenant retention and proactive leasing strategies to fill the vacancies. Simply relying on the agents sign does not work in a difficult market and managers must adopt a 'hands on' approach to finding tenants. This can involve using market knowledge to approach tenants who are thinking of relocating and negotiating them into your space or targeted marketing campaigns aimed at bringing your space to the attention of prospective tenants.
The secret to investing in commercial property is to never forget the long-term nature of the asset and, with this in mind, the volatile times will fall into perspective.