Rate cut a shot in the arm for commercial market

Posted On Wednesday, 18 May 2005 02:00 Published by
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Not residential, but commercial stimulated

May 16, 2005

While the recent unexpected interest rate cut has not stimulated the upper end of the residential property market, it certainly has been a shot in the arm for commercial and investment real estate, says Auction Alliance CEO Rael Levitt.

The commercial property market has taken to auctions over the past
18 months and the reasons are obvious, says Levitt.

"Firstly we started bringing properties to the market that were previously under-exposed or sometimes unexposed to the real estate investment public.

"Unlike residential estate agents, many commercial properties were never advertised, never marketed and never exposed to buyers.

"Commercial brokers would at best put up a 'for sale' board outside a property and would rather focus on selling to an established buyer database, which were normally the large funds and known property investors," said Levitt.

"What has happened is that new entrants to the commercial property market have not been part of this network. New investors, smaller operators and the one-off investor never had a clue what commercial and investment property was coming to the market.

"It amazes us that in the country's commercial and industrial heartland, there is no section in any newspaper dedicated to commercial and investment real estate advertisements.

"If potential purchasers were not tied into brokers, or missed the occasional 'for sale' board, then they had not a hope in hell of ever being exposed to properties.

"That is why the property funds just get bigger and bigger. They were exposed to all the good deals, and often traded between themselves without anyone else competing.

"Auctions, with an aggressive advertising and marketing strategy, have now brought commercial and industrial properties into people's living rooms, with direct and bold advertising. All of a sudden we found a new investor class, many of which are black investors, who suddenly saw our high profile advertisements and started attending our auctions," said Levitt.

"These new buyers often pay higher prices for smaller properties and can achieve better returns by hands-on property management and innovative unlocking of value.

"Another major factor why investment auctions have swung strongly to the auction mechanism is that buyers in this arena are unemotional and the speed and certainty of auctions prospers in this environment.

"Price at auctions is the determining factor and commercial real estate is well suited to this environment," he said.

This article was originally published on page 8 of The Cape Argus <http://capeargus.co.za/index.php?fArticleId=2519795> on May 14, 2005

Publisher: The Cape Argus
Source: The Cape Argus

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