Commercial real estate with Andrew Hiskens of Colliers North Shore
Basic Anatomy of a Commercial Property Investment
Andrew Hiskens of Colliers International in Takapuna offers some guidance and answers to commonly asked questions for people thinking about investing in commercial property.
If you are thinking of investing in commercial property, there are a number of things you should consider as you approach the sector.
What makes a good commercial property investment?
I could say location, location, location, but obviously it is much more than that.
The advantages of good access, plenty of parking, local amenities and the nature of surrounding business all play a part in contributing to the success of a business - and business success goes hand in hand with how well a commercial property investment performs.
The principals of what makes a great investment are the same the world over:
- Location – for profile, accessibility and future growth
- Building construction – for low maintenance, security and versatility
- Tenant covenant – for security of rental payment. The ability to pay the rent now and in the future taking into account rental growth.
- Lease term – as the market moves through cycles lease term enables the vendor to plan for change and capitalize on market demands and inflationary growth.
- Flexibility – does the property provide for the intended use and or can it be altered to meet the market changes.
What are the key things to consider when investing in commercial property?
- Equity – the level of cold hard cash that you are putting into the investment
- Risk – how much risk are you prepared to take, as risk and reward go hand in hand
- Timeframe – how long you intend to retain the property, and your motivations
- Type – industrial, retail, commercial office – they all have a place and move through cycles at differing points in time
- Partners – provide the ability to scale up the size of the investment and share in upside / risk.
- Remove the emotion from your decision, as it has limited value when choosing a commercial investment.
My recommendations
Risk and reward play a central role in commercial investment when looking to purchase. Let’s face it, all investment decisions require a personal balance between the level of reward you seek and the amount of risk you are prepared to accept in order to achieve it.
Prospective purchasers may pay a premium in order to achieve a lower risk on their investment and get a secure cashflow, whereas some investors/speculators will try for a higher return but are prepared to take more risk around tenancy expiry or possible vacancy.
As the property market works in cycles, with peaks and troughs, property investment is best viewed as a long-term game, as time often sorts out values.
Whether investing in retail, office or industrial property, information and market knowledge are essential and can be the difference between good and bad investment decisions.
Secure cashflow is king. Whilst everyone wants a bargain, often it’s a bargain because of inherent problems. So stick to the basics and work with your head not your heart.
Three great North Shore commercial properties – and why
Here are three great properties we are offering, plus some reasons why I recommend them:
41 Arrenway Drive – This is a near-new, north-facing, architecturally-designed office warehouse facility in a popular industrial precinct with a new lease in place to a high quality tenant.
“It is a premium industrial investment opportunity, because not only is it an immaculately presented and highly specified building with road-front exposure to the premium Arrenway Drive location, but the property is in an affordable price bracket with a well respected national tenant that been in business for over 30 years. “It has the best of everything and will suit investors looking for a long-term hold. Stand alone, secure, tenanted investments of this quality are very rare and would be an ideal fit in any portfolio.”
www.colliers.co.nz/14324
59B Apollo Drive – A high profile and securely tenanted A Grade office building located in the heart of Auckland’s Apollo Technical Park precinct on the North Shore has come up for sale at 59B Apollo Drive.
“This near-new, well presented two storey building offers a net lettable area of 477 sq m plus an 18 sq m deck, as well as 18 allocated car parking spaces. It has a new four year lease taken up by Carter Holt Harvey, a tenant of international calibre. “Not only does it have an elevated corner profile over a busy thoroughfare, close to industrial, commercial, retail centres and motorway interchanges, but it also has a top quality, modern fitout.”
www.colliers.co.nz/11824
10 Rothwell Avenue – A large North Shore campus facility that has been just been leased to Unitec Institute of Technology on a long-term basis has come up for sale at 10 Rothwell Ave, North Harbour.
“The property has been built to a very high specification, it is situated in an established North Shore precinct and it is a future-proofed property with a superlative tenant. It will be highly suitable for long term passive investors with guaranteed growth, attracting interest from fund managers, family trusts and syndicates. “This is a strong offering for any investor looking for solid, sustainable rental growth.”
www.colliers.co.nz/11431
