LJH Commercial

06 LJ HOOKER COMMERCIAL MACARTHUR Your status as either landlord or tenant, and where you are in your property journey, will determine your perspective on yield. To further understand this, we must examine yield through two main lenses—sales and leasing campaigns—to better assess its key contributing influences. In a sales campaign, low yield is a sign of strong demand from investors. The strength of the economy, shortage of stock and future opportunities (such as nearby infrastructure additions) can encourage investors to pay more. This is known as yield compression, where the yield decreases as a direct percentage of a higher sale price. Owners who sell at a low yield have generally transacted at a strong sale price. For an existing landlord however, low yield means something else entirely. In a leasing campaign, it represents subdued interest from tenants. As a landlord, you may have to reduce the asking rent to attract enquiry. Low yield, or in this case rental return, can be situational. It could reflect over-supply, a weak economy, or an asset that is located away from transport, amenities or ancillary operators. These factors can contribute to making the property less enticing for prospective tenants. Despite this, there are many opportunities from which investors can increase the yield through securing additional rent. Primarily, this can be achieved through adding new facilities or lease offerings to the tenant. If you do successfully increase the yield of your asset as a landlord, you’ll generally want this added investment factored into your premium when you choose to sell. This is a simple, yet effective method of increasing the interest in your asset. What influences yield and how does it impact a selling and leasing campaign?