The commercial market is a great indicator of what’s going on as not only is it ‘property’ but it’s business too, as businesses (mostly) need an office or factory to carry on their business. Why is it then, that the majority of advertisements I’m seeing, are distressed sales? The Receivers, Mortgagee In Possession, Expressions of Interest due to divorce, bankruptcy of some related party or plain Bank pressure advertisements and results of my phone enquiries are not falling away. I don’t think they’re getting worse (at least not at the moment) but they’re not going away either.
The vacancy rate near my place is still astronomical at above 50%. FOR LEASE and FOR SALE signs on some shops where the windows face the western sun are so old they are cracking, peeling, fading and falling off the inside of the window. That in itself is indicative of the poor quality of Agents acting for these distressed sellers and lessors – too damned lazy to change and update the signage so that they places don;t have that run-down, no-hoper look about them. A decent agent will also pressure their sellers and lessors to clean the windows and inside the premises on a regular basis and clear the mail. often the mail is easily readable and it’s quite obvious that letters are from Collection Agencies, Banks and others looking for money!
Leases are being renegotiated by struggling lessees as business conditions, especially in retail, continue to deteriorate. Lower lease payments have an immediate effect on capital values. large anchor tenants have been holding lessors to ransom and some deals I’ve heard the intimate details of recently would make your hair curl. I dare not reveal them as some of the parties are not-so-nice!
However, those in the public domain can be talked about and I refer to the recent sale of Ashmore City Shopping Centre which was bought in 2003 for $37 million. I’ve visited this centre many times over the last ten years and watched tenancies come and go, vacancies appear, some really shitty shops open, and close soon afterwards. it used to be a reasonable place to go – now, not so much. it was offloaded for a tad under $38 million. That is really NO PROFIT after 8 years of ‘ownership’ and reflects, in real time, what’s happening in retail.
The whole real estate market is undergoing fundamental structural change. I cannot believe some of the decisions being made by large fund managers who manage YOUR MONEY, probably your Superannuation, plowing half a billion dollars into Shopping Centres in the vain hope of turning them into “destinations”. HELLO! We’ve already tried that – it didn’t work. Gangs of feral teenagers take over Shopping Centres and make them not nice places to be. Desperate leasing agents lease space to what can only be called “Gypsie Traders”, you know, the ones selling hair styling products who all but crash tackle you to the ground as you walk past. Shopping Centres are no longer “Nice Places” nor are they destinations, no matter how many rides and gimmicks you fill them with. My local large shopping centre, Robina Town Centre, is no longer a nice place to be. its now officially TOO BIG, the car parking a nightmare and you have to walk MILES to get things done. The old fashioned strip shops along a street are enjoying a resurgence. I know I’m quite happy to pay a little more from a smaller shop where they know your name, sometimes see you coming and have your coffee half made before you get there. Awesome. We are sick to death of Mega Malls – they are a dying breed in the USA and will surely follow suite here. The nongs who are about to spend squillions on Pacific Fair will fail in their efforts (my humble prediction) and it will be over run with ferals and demanding, grubby-end-of-the-market tourists. The centre will fill with cheap and nasty touristy stores and it will become an altogether unpleasant place to be, despite the hanging gardens of babylon, pools and waterfalls they’ve promised in the glossy brochures.
Its all changing so fast and some of these dinosaurs continue browsing in the same place, unaware or ignoring the dramatic change about to hit them…
Oh well – we can only wait and see.