Exploring different methods of commercial property sales
When it comes to buying or selling a commercial property, it’s important to be aware of the variety of sales methods available for use. These methods vary in terms of complexity, time frames and potential returns.
Let’s take a look at the four primary methods of commercial property sale and some of the benefits for sellers and investors of each:
Private treaty sales
Perhaps the most conventional method of commercial property sales, private treaty sales, involve the property owner setting an asking price and then interested buyers negotiate directly with the seller or their appointed real estate agent. This method offers flexibility in negotiations and allows both parties to agree on a price that suits them.
For investors, there’s less pressure to make an immediate decision on an offering price and whether or not to go ahead to purchase as there’s more time and potentially less competition. Similarly, the selling property owner has more time to consider the offers made to make an informed decision.
Some property owners also prefer private sales treaties as they are able to maintain confidentiality. This is particularly favoured by those selling commercial properties with sensitive proprietary information.
An auction is a dynamic and transparent way to sell commercial properties. Sellers set a reserve price and the property is presented to potential buyers in a competitive bidding process. The highest bidder at a pricing level which is acceptable by the vendor secures the property.
Auctions can create a sense of urgency and competition among buyers, leading to potentially higher sales prices for the property owner. They are also a swift process as there is a date set on which the property sale is taking place, and the property is unconditionally exchanged when the hammer falls, resulting in a quick transaction.
For property owners, you have the benefit of being able to see what competing bids are made to gauge the property’s market value. However, you need to be ready to decide quickly if you want to make a purchase and set a clear budget on what you are prepared to spend.
Expressions of interest (EOI)
EOIs are a method where potential buyers submit a written offer to purchase a commercial property within a certain time frame. The seller evaluates all offers and selects the most attractive one.
This method is often used for unique or high-value commercial properties and provides flexibility and time for the seller's to comparatively assess offers in relation to prices, deposit, settlement conditions, due diligence and buyer profile before making a decision. This method may involve multiple rounds of offers in order to extract the best outcome for the seller.
In this method potential buyers submit sealed bids for a commercial property by a specific deadline. The seller reviews the bids and selects the most favourable one.
Tenders can generate competitive offers and are often used when confidentiality is crucial. For the seller, there is the benefit of being able to assess multiple bids at one time to select the most attractive offer.
On the other hand, investors must be more prepared in their due diligence research to determine the property value and the amount they wish to bid. As they cannot see what other parties are offering, they must make their bid compelling.
Seek expert advice if you’re looking to sell or invest in a commercial property
Private treaty sales, auctions, EOIs and tender sales all have their place in vibrant real estate markets.
To make an informed decision, property owners and investors should consider their specific goals and consult with local real estate industry experts like the team at Commercial Collective when looking to sell or purchase property. To contact the team at Commercial Collective for advice, click here.