Auctions are a transparent process, which is attractive to buyers. The internet has contributed to the growing popularity of auctions in the commercial property industry, says Bayleys Realty Group's chief auctioneer Hayden Duncan.
Duncan says 25 per cent of Bayleys' sales are now transacted by auction compared with 20 per cent five years ago, with much of that increase coming over the past two years.
Auctions account for just over $1 billion worth of Bayleys' sales a year across its commercial, residential and rural businesses. Last year, the agency sold 380 commercial and industrial properties worth in excess of $200 million by auction, up from 246 five years ago. Duncan says close to 70 per cent of properties auctioned through Bayleys' Total Property campaigns in Auckland and Wellington over the last year have sold in a challenging market.
While some of the increased use of auctions here has been a flow on from Australia, where auctioning has a strong market hold in a number of states, Duncan attributes a good part of New Zealanders' greater acceptance of auctions to Trade Me, where many sellers use this method of sale.
"The internet has introduced auctions to a lot more people. They have discovered that it is the most effective way to get the best possible price for the goods you want to trade and it's not a scary process - it's relatively simple and it gives everyone certainty around the sales process."
Duncan says property buyers appreciate the transparency of property auctions. "It allows them to compete openly - it's the only method of sale where they can actually see what other parties are offering. Sellers also have to be seen to be keen to sell to attract the best buyers and taking a property to auction is a good way of demonstrating this."
Some significant commercial, industrial and retail auction portfolios have hit the market over the past 12 months, including Lincoln Rd North Shopping Centre, where all 22 shops put up for auction sold, parts of NZ Retail Group's Westgate and Fraser Cove Shopping Centres and Downer EDI Works and Farmlands portfolios.
Last week Bayleys offered a portfolio of 26 Wanganui commercial and industrial properties for auction - of which 20 were owned by a trust involving Auckland businessman Michael Stiassny. Twenty of the 26 lots sold under the hammer and of those sold 19 were from the Glenogle Trust (Stiassny and others) portfolio.
A further three properties are currently under negotiation.
The auction was the biggest sell-off of its type in Wanganui, with more than 100 people in the room - representing a Who's Who of Wanganui's legal firms, property valuers and sales consultants.
Duncan says time is the biggest benefit of auction. "An auction puts things into a concentrated timeframe and on an unconditional basis, which is important in the current market - there are plenty of option-takers or conditional buyers out there [right now]."
He says one of the interesting twists of the new Real Estate Agents Act, given that it has greater consumer protection as its primary objective, has been the deregulation of property auctioning.
Only licensed auctioneers could auction a property previously under the Auctioneers Act 1928 but there is an exemption to this requirement under the new act - the only industry which has been granted this for auctions. Now any licensed real estate practitioner can conduct an auction.
"As a result," says Duncan, "people need to be careful about who is doing the auctioning and make sure they have the expertise, experience and track record to do the job."
From his position on the rostrum, Duncan gets a good view of his bidders and of where the market is moving. He says a notable feature of the market this year has been the rise of owner-occupier interest in well-located vacant buildings that has been driven by low borrowing rates and some good buying opportunities.
"There is also strong demand for A-grade investment stock with good tenants, long leases and desirable locations. Take away any one of those three features and it gets a big tougher. Take away two and it has a significant impact on yields achievable."
Duncan describes the current commercial and industrial property market as "normal" rather than "tough". He says it is very balanced between buyers and sellers.
"Properties that are marketed well are getting results whereas those that have shortcuts taken on them from a marketing perspective are not enjoying the same success."