Market Update September 2016
It's been some time since I have updated everyone on the market. In April I discussed structuring a sale and that more and more vendors are requesting a sale of shares as a going concern or walk in walk out. The benefits for a vendor are quite compelling, most importantly not having to re-sign managing agency agreements, but with every silver lining in a rent roll sale comes a compromise. The purchasers rightly so expect complete and transparent due diligence in that company. This process can be long, drawn out and difficult to manage with keeping confidential from existing staff and others in the market place.
As I'm meeting agencies and principals discussing their thoughts on the current real estate market, more and more state by state I am hearing a common complaint. This is a tough market with little stock available. With that comes challenges on cash flow for sales dependent offices, but even more stressful are the staff challenges that come with disappointments in a tough sales market. One of the main reasons vendors sell is because they've had enough of managing staff. Many principals are happy to stay on as a selling Sales Consultant with the purchaser working part-time and doing what they really enjoy, selling!
Pressure on commissions with little stock for sale means agents discount their commission in order to get a listing, which we can all agree is the wrong approach, however coupled with pressure on management commissions, it makes it harder to stay motivated let alone keep the sales team and staff motivated.
So pretty much reasons for selling haven't changed in the short term, and vendors are still looking for a sale of shares or re-signing managing agency agreements with a purchaser as long as they acquire as a going concern or walk in walk out. Those agencies or principals that are looking for a quicker sale I advise look for a walk in walk out buyer, but keep your options open to re-signing agreements as a rent roll only sale. I believe it's about the outcome, with what you want, how you want it and most importantly the timing.
Have multipliers or prices changed? Not really is the answer, however disruption is still occurring with new non-real estate industry entrants and they are also willing to pay a premium in order to acquire instant market share and quality income. $4.00 + is still obtainable in and around close to Sydney city however valuations are expected and should come in at late 3s to $4.00.
Multipliers
Western Sydney - $3.00 - $3.30
Inner West - $3.50 - $3.90
Lower North Shore - $3.65 - $4.00+
Inner City/Inner East - $3.70 - $4.00+
Eastern Suburbs - $3.70 - $4.00+
South/Sutherland Shire - $3.50 - $3.90
* multipliers are indicative of mc rent roll broking past & current listings of offers presented, exchanged & completed contracts of sale. All include rent roll only, WIWO going concern rent roll & sale of shares with rent roll.
