This is according to Tony Bales of commercial investment broking specialists, Bales Delaporte.
 
“Commercial property investors are currently feeling battered and bruised.  Globally property shares have been in free-fall for 12 months, vacancy levels are rising fast and defaulting tenants are on the increase.”
 
“As investors realize that they need to be able to get through the next few years they are adjusting their strategies accordingly,” says Bales.  “Many investors are considering selling properties, but until now have waited to see how this unique global downturn is going to unfold.  As the realization that this downturn is going to last longer than initially anticipated, many investors are opting to “sell-at-best”.”
 
Bales advises that with the banks’ reduced appetite for property lending, cash flush investors have entered the market again and are actively seeking commercial investments. 
 
“But this time investors are being extremely selective and are able to analyse specific properties far more closely than they have done so in the past.  Investors are focusing on the factors that in the past made property investments suitable, location, condition of property and most importantly – tenancies and the resultant cashflows.  We are seeing a return to the same investment criteria that were used 20 years ago!”
 
Bales further states that what is value for one investor may not be value for another. 
“A passive investor may offload a property to one who has the capacity, time and inclination to develop it and unlock the potential value.  Investors all have different profiles, such as knowledge, size, skills, etc. thus ensuring constant value arbitrage in the commercial property market.” 
 
For example, many of the larger listed funds are looking at selling off portfolios of smaller, more labour and management intensive properties.  Such properties are no longer suitable to a large fund, but could offer good value to a smaller investor willing to roll up his sleeves and really work at extracting the true value.
 
“The key here,” says Bales, “is to understand exactly what is value for oneself. The greatest value investor of all time, Warren Buffett, did not buy any technology shares during the boom in the late 1990’s – a move for which he faced mayor criticism.  However, his actions were well rewarded in the end as today he is one of the wealthiest people in the world.”
 
Bales concludes that the most successful commercial property investors in the next 24 months are going to be those focused, knowledgeable players who exploit the concept of value investing.  “After all, the property moguls of the future will already have started accumulating their wealth through value investing under current market conditions”.
Publisher: eProp
Source: Bales Delaporte