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Thinking of selling your commercial property ?

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It is on a daily basis that we are now being approached by owners pondering the “should we be selling” question and therefore wanting to know about maximising value.

Two important factors:

Is there anything an owner can do that will assist with maximising its value?

a) presentation
b) lease terms
c) documentation

Presentation is always an important factor, particularly for investors. Often that first impression can be critical in maintaining or increasing a potential purchaser’s interest. This can be from replacing stained ceiling tiles to toilet hardware, to outside weed removal or replacing rusted/leaking gutters. A well-presented property suggests to a purchaser that there are unlikely to be future issues, the tenant is happy and it should be relatively easy to re-lease in the future. A poorly maintained property suggests just the opposite, that the obvious deferred maintenance may just be the tip of the iceberg.

If you have a lease in place there may be the need to carry out an upcoming rent review or get certainty around an impending lease renewal. The majority of purchasers will base their value consideration on what the property is actually returning, not on what it might return – and certainty on a lease renewal is incredibly important for passive investors, who currently make up the majority of purchasers. Conversely if a tenant confirms that they will not be taking up a right of renewal, this will then clearly attract either owner-occupiers, or developers.

Get your documentation in place. The first question a bank is going to ask a potential purchaser, is to confirm its earthquake strength status. A report can often take some time to be completed, as qualified structural engineers are currently in hot demand.

As part of any marketing campaign, the vendor should supply a LIM. This allows for any issues that may be highlighted, to be dealt with early and potentially rectified – anything from a Code Compliance Certificate not being issued, to a BWoF showing as lapsed.

Just as uncertainty can be an owner’s adversary, certainty is equally a purchaser’s friend.

What is the best method of selling to maximise its value?

Every property will be different, but one thing is for sure – a property needs to be openly marketed and the element of competition will be crucial in maximising its value. I often hear “we have a valuation, so that must be what it’s worth?” –  not necessarily true, a registered valuation is an opinion on value based on recent comparable sales, often undertaken for a bank or financing purposes. As we often say, it actually doesn’t matter what an agent or valuer’s opinion of value is, the market is the only true determiner of a property’s value – having been marketed widely and with competition. Our job as marketing agents is to provide good credible advice around how we may work together to maximise that value.

There are essentially four recognised methods of marketing and selling – all have different principles that will potentially vary depending on the property and circumstances. This could include a combination of the location, lease terms, price bracket, seismic rating and tenure of the property.

  • Fixed Price
  • Auction
  • Tender
  • Deadline Sale

It is increasingly important to provide a deadline in which potential purchasers must act, so as to drive urgency from them.

The biggest risk for a vendor? Selling without seeing what the open market will pay. I personally have sold several properties in recent years and without doubt, the marketing and competition was my friend.

Remember – you only have one opportunity to put your property on the market for the first time.

Covid has led many people to reassess their lives – and also their property holdings. Genuine vendors are now considering making selling decisions, due to a wide variety of reasons. I have always held the belief that every vendor deserves to have the opportunity to maximise the price that the market is willing to pay. Vacancy rates remains low, demand for commercial property remains high, bank lending and deposit rates are at historic lows, so what better time to consider the question around selling?

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Mike Neale