2012 – The Year of Genuine Recovery

Posted on Friday, November 11 2011

Anyone involved in the commercial property sector over the last three years will acknowledge that we have been through the most challenging times in living memory.

As the global economy collapsed around us in 2008 and many businesses fell into receivership, building owners were left facing rapidly rising vacancy levels and rentals declining. Those with debt on their properties and who lost tenants fell into the tender clutches of the “debt recovery units” of their bank. This inevitably resulted in a forced sale and a very sorry state of affairs for all concerned.

Whilst there is no doubt that we have survived the worst of it, it is still very much a tenants market. We are not seeing any rental growth across the board with landlords just happy to retain existing tenants and avoid vacancies. New tenants are driving hard bargains when negotiating for space with owners carrying the cost of any fit-out and also being required to grant significant rental holidays, The rule of thumb has become one months rental holiday for each year certain of the lease i.e. not including any rights of renewal.

At the same time, the owners are being asked to accept lower rentals than what they had previously enjoyed.

That said, the alternative is an empty building with no income at all.

As I have said, I believe that we are now over the worst of it and this is based not upon some sentiment but rather the feedback from literally hundreds of businesses and the level of leasing enquiry across most sectors and most centres.

The difference between now and this time last year is the level of enquiry. Many commentators at the end of 2010 were picking 2011 to be the year of recovery but we never saw that as being accurate, again relying on feedback from the many businesses with whom we interact and the dearth of leasing enquiry.

We certainly have more reason to believe today that 2012 may just shape up as the first year of genuine recovery for the commercial property sector.

D.J. McMahon
Managing Director
McMahon Commercial

 

 

 

 

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Denis McMahon

Brought to you by Property Managers Ltd: Pacific Property has been formed with the aim of building, over time, a diversified portfolio of Industrial, Retail and Commercial properties to provide strong sustainable returns to investors which will be managed by experienced property manager, Property Managers Limited (PML). The directors of Pacific Property Fund are Denis McMahon and Philip Tushingham, who together have over 45 years of experience in investing in, and managing commercial properties. “Pacific Property presents an opportunity for investors to invest in a brand new quality industrial building in Mount Maunganui and to join us as we build a quality commercial property portfolio diversified both geographically and across industrial, retail, and commercial assets.”

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