The net rental yields were all above 5% and some were above 7% at Bayleys' latest Auckland commercial property auction on October 23.
Many of the properties offered were smaller, suburban retail units which sold for less than $500,000, which would have appealed to mum and dad investors chasing a rental income stream.
For example, two retail units in the Royal Oak Mall, one leased to a cafe operator and the other to a mobile phone supplies and computer repair operator, were offered separately, with one selling for $450,000 providing it's new owners with a net rental yield of 7.21%, while the other sold for $330,000 providing a net yield of 6.81%.
Further out of town a 233 square metre retail premises in Wellsford with a new six year lease to NZ Post/Kiwibank sold for $422,500 providing a net yield of 7.57% (with commercial properties the tenant usually pays outgoings such as rates and insurance so the yields are net).
The yields on several properties dropped below 6%, including a 290 square metre restaurant at Albany that sold for $2.1 million providing a yield of 5.71% and a smaller 65 square metre premises leased to a nail salon in Silverdale sold for $485,000, providing a yield of 5.52%.
The cheapest sale of the day was a vacant 78 square metre retail unit by the main entrance to Meadowbank Shopping Centre that went for $305,000.
Bayleys had 18 properties on the Order of Sale for the auction but one was withdrawn and one had its auction date postponed, and of the 16 that were offered on the day 10 were sold under the hammer and another was sold immediately after the auction.
Photos and details of all the properties that sold are available on our Commercial Property Sales page.
Details of residential properties offered at auctions around the country are available on our Residential Auction Results page.
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14 Comments
$330,000 providing a net yield of 6.81% and $450,000 a net yield of 7.21% seems pretty good. That would be net $1,872 and $2,703 a month respectively . Compare that to a TD return after tax of around $500 and $700. I can't help thinking that there must be some other costs associated with owning this property. The adverts say net rental income plus GST but surely there would be tax to pay on this income? Excuse me if I am being a total ignoramus with my understanding of yields/costs on commercial property but it sounds rather a good deal doesn't it?
I think the big thing with commercial is that when the tenant leaves replacing them is a lot harder. How many commercial premises do you see vacant with for lease signs on them for months on end?
The retail property in Wellsford with a new six year lease to NZ Post/Kiwibank wont have that problem for a while. It sold for $422,500 providing a net yield of 7.57%. It seems "net" means you don't generally need to pay rates and insurance but tax on income would still need to be paid I guess. It seems like you could borrow the entire sum for this property and make $1000 a month after paying the mortgage.
Isn't the new Highway 1, that's currently under construction, going to by-pass both Wellsford and Walkworth? ( the current Horror Spots for traffic on the Holiday Highway) If so, that's going to be a massive drop in through traffic, and so, customers.
Could be a good thing bw, like the SH1 cambridge bypass. Before it was completed, there was nervousness and apprehension among many not just retailers. After it was completed it's a different story. The town has blossomed with locals shopping in their own patch now instead of going to other nearby places without the horrendous traffic problem. Business has INCREASED immediately after and since the bypass opened.
You could be right. But if not, the buyer has an asset that after 6 years ( if Kiwibank ups-sticks for lack of business) will be worth, what? Yes, some small towns do ok when the highway moves ( Wellsford, pop 2k isn't exactly Cambridge, 20k), but others ( up there, like Waipu, when SH 1 moved to pass it) take years and years to 'do a Cambridge"!
2k vs 20k, very true bw, that makes the equation a lot more risky even though the area is growing strongly (3.5 percent pa from last census). The new sh1 roading will help to encourage growth but people like central areas better than far flung. Such as this stonefields research:
The suburb where new build homes resell for an avg $500k profit
http://nzh.tw/12279614
Interesting article link. Unusual, that it is accessible to readers outside the NZ Herald paywall.
Then a few of words at the bottom of the article caught my eye which made me question the entire independence of the article. What were the words? - "Paid Promoted Content"
Note the words were also in a light blue colour, making the words less noticeable ...
FYI, reminded me of this experience in Ireland - https://inquiries.oireachtas.ie/banking/hearings/julien-mercille-on-the…
Couldn't have said it better house works!!!!we got our town back when they put the by pass in.Cambridge is a better place for it!!!!
Thanks Narrabeen I take an interest so it's from what I've heard "on the grapevine". Its a great place. We are in Hamilton and sometimes head to the popular curry restaurant there in your town.
Awesome!!!you should move over here☺☺☺.if your into Thai food try out sila Thai.very authentic and reasonably priced!!!it's hidden out the north end of town.across the road from the good union.we go to the Indian resturant on alpha st.....pretty darned good too!!!
At 305k (plus gst?) for the meadowbank unit you would think it wouldn't be hard to make 10 percent net (after rates and insurance). That's only 600 rent per week.... however if it was the best shop in the complex why is it empty? Are the body corp charges excessive or too many restrictions.
It is a pleasant but quite quiet complex.
Tenants usually pay all outgoings in commercial rentals. So rates, body corp, insurance and repairs (if damaged by tenant) etc are paid by the tenant. Usually banks only lend around 50% on commercial real estate. Guess it is perceived as volatile values with potentially long vacancy periods, compared with houses. But I think quality commercial property is a superior investment, if you know what you're doing. Dealing with business tenants is simpler, than all the emotional factors that come with home rentals. Capital gain is not guaranteed, and is usually gradually made through new leases, which increase the yield, or redeveloping the property. It is quite a specialised area, and not for the faint hearted or under capitalised.
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