How is insolvency impacting the commercial property market?

“We are seeing stress in large land holdings whereby holding costs have increased significantly and there is no income to offset this capital cost,” Cowan says. 

“There was a softening of marketing conditions pre-COVID, however the market remained resilient given interest rates were still low. In 2019, there were approximately five transactions, whereas currently, in NSW alone, we’ve got 11 on-market mortgagee-in-possession or receiver-appointed assets on market, and we’ve already exchanged or settled on seven properties.”

While Cowan anticipates continued pressure on the market through 2023, he reports a lack of supply is holding up prices. 

“Vendors are reluctant to crystallise a loss, partnered with a low completion rate for new builds given planning hurdles,” he says. 

“The Department of Planning, based on its assumptions of overseas net migration and population growth, require 30,000 new dwellings per annum to meet demand. We haven’t reached 30,000 dwellings for the last four years of completions, and, in fact, in 2023 we’re only predicting 11,000 completions.”

This stock shortage translates to plenty of buyers for those assets that do come to market.

In December, Colliers fetched $11 million – 30 per cent above the reserve price – for a mixed-use project in Blacktown where development had already commenced, with concrete poured and structure built up to level five.

Colliers quickly identified the likely buyer pool, which included local builders and developers with appropriate capital partners, and ran an auction campaign to remove ambiguity and buyer fatigue, and to ensure there were cash, unconditional bids.

A collaboration between Colliers’ Restructuring Property Services (RPS), Western Sydney and Residential Project Marketing teams delivered a rounded sales pitch that fielded 88 inquiries and five registered bidders, and the property sold with an eight-week settlement.

Cowan says Colliers is able to leverage its wider network, with the RPS initiative linked to the national investment services team, giving these campaigns access to 10,000-plus buyers located locally and abroad.

He says often developers wait too long to seek advice and encourages contact at “the first signs of stress” to discuss divestment, refinance or restructure. 

“Don’t hesitate to reach out to these experts at Colliers to leverage the intrinsic knowledge that they have,” he says. 

“We mobilise the wider business to provide robust advice and sophisticated workout solutions. The broader NSW Restructuring Property team comprises 13 individuals spread throughout the country, supported by Colliers’ wider workforce.”

Colliers’ RPS was founded in 2011 with a dedicated national strategy to service clients in the restructuring and insolvency sector, and the strategy remains in place through all phases of the economic cycle, not just during a bust market.

“Unlike other agencies that have established these initiatives only in the bad times, trying to capture the balance of the market, we’ve really been around for 12 years specialising in this market,” Cowan says.

RPS has been holding presentations for bankers, receivers, funders and accountants every quarter since its inception, and in that time has sold 710 distressed assets totalling $2.17 billion.

Following the right advice from accountants, Cowan says receivers, bankers and agents can often realise a positive and net result for all stakeholders by moving quickly and efficiently. 

He gives the examples of a commenced development site in Arncliffe, which sold well in excess of expectations at $31 million subject to a four-week settlement, and 44 residual apartments in Rouse Hill that sold for over $20 million in a quick and collaborative sales campaign that included agents from Parramatta Investment Services, Sydney CBD Investment Services, Project Marketing, Asia Markets and Project Leaders.

Colliers can tackle insolvency sales from $500,000 up to $500 million and currently has more than $400 million worth of relevant assets on the market.