A glut of distressed property and a shortage of institutional buyers are dogging the commercial property investment market.
Brent Buchanan, Tower's head of property, told an Auckland briefing yesterday that in the first half of this year there had not been a single real estate purchase by major institutions of more than $5 million - but he expected this to change.
His statement was reinforced by one of the country's top agents, Ray White Commercial's Bruce Whillans, who said institutions were sorely missing from the market but listed property vehicles were still actively buying and selling.
Whillans' largest deal in the past 12 months was the $35 million sale of the Dilworth portfolio. Other sales included blocks of land at Albany owned by interests associated with developer Rick Martin for $22 million and $22.5 million, the URS Centre on College Hill for $21.3 million and Ponsonby's empty Soho site to Progressive Enterprises for $17 million.
Ray White Commercial completed $145 million of sales in its first year in business, he said.
"I am noticing a change," Whillans said, referring to calls from Scott Pritchard of AMP NZ Office and Chris Gudgeon of Kiwi Income Property Trust.
"I think they're starting to stick their heads up above the parapet and I'm enjoying getting the inquiries," he said.
Buchanan of Tower outlined how troubled property investments abounded, including vacant or near-vacant real estate and how distressed owners were waiting in the wings, poised to sell.
These investors generally held a portfolio of assets but were under pressure to retire debt or repay equity, he said.
"Poor quality or distressed assets are being offered first, attempting to retain good stock."
Sales, when they did occur, were in the low-value range of $5 million to $10 million and were not enticing institutional investors, Buchanan said.
"Purchasers are holding back in anticipation of better stock to come." he said. But, like Whillans, he sees a change soon.