26 April 2019

Commercial success in a changing market

Turn on the TV, open a newspaper or scroll through social media and the message is one of doom. Scaremongering sells and it seems many commentators are eager to write the commercial property market’s obituary.

While we can’t deny conditions have cooled, has the market really swung from boom to gloom? Is it really that bad?

Not as bad as reported

Like the residential property market, the commercial and industrial property markets had been running hot. And similarly to the residential space, there’s now a slowdown.

“The commercial market will not perform as well as it has been, but it’s not as bad as some would have you believe,” Bobby Suminoski, Principal Licensee at Four Walls Commercial, says.

“Investors have seen major increases in rental yields and value over the last five to seven years. And while the market is prospering and rental returns increasing, the cost of borrowing is also increasing therefore reducing return on investment.

“Commercial agents must remind their investors that while value might not grow at the same rate as in previous years, there will still be growth. Investors are looking for safe, solid returns and commercial property is still likely to be far better than other investment opportunities.

“There’s so much volatility in the stock market. This unpredictability isn’t as prevalent in the property market, which keeps investors coming back.”

Have patience

Kymbal Dunne, Director of Client Solutions at Knight Frank Australia, agrees, and advises commercial agents to be patient.

“To buy today will likely mean taking a long-term approach to investment,” he says. “Investor views will vary on when the right time to enter the market is and, given there are so many different markets by location and property type, some opportunities will be better than others.

“Now is the time to pause – but don’t go to sleep. Not all parts of the market are quiet, so it’s time to review and reconsider where you spend your time.

“It’s time for clever leasing and property management, and I believe quality research will become more and more in demand, as investors review the long-term value proposition for holding, rather than trading.

“This phase of low transaction activity provides the opportunity for agents to reshape their offering. Experienced agents will look to alternate means of supply, such as arranging for investors to swap properties. They’ll look at client motivations and provide creative solutions.

“Client focus is key and now is not the time to be distracted.”

Tips to surviving and thriving in a tough market

  • Strategies | Prioritise customer service and strive to maintain good client relationships. Also work diligently towards attracting a steady stream of clients.
  • Return to databases | Work your database harder and allocate more resources to growing it and getting it into tip-top shape. Focus on traditional sales techniques, such as advertising handouts, eDMs and phone calls, to create new business leads.
  • Focus on education and skill development | Now is the perfect opportunity to place greater emphasis on upskilling, staff education and training programs. Take stock of your personal abilities, and concentrate on addressing your weaknesses and developing your strengths.
  • Concentrate on quality, not quantity | Focus on building strong client relationships, as today’s customer is tomorrow’s referral. Providing sellers with realistic, authentic advice and managing price expectations to reflect local market conditions are great ways to demonstrate your value. Maintaining good post-transaction contact is another important consideration, as your attentiveness can play an important role in attracting new clients.
  • Maintain perspective | Instead of focusing on negative reports on the property market, refer to your on-the-ground experience. Pay close attention to any changes in area demographics and price points, with the goal of adapting campaigns to local market conditions.

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