April Commercial Property Auction Market Update

Are Commercial Auctions Still Bouncing This Spring?

Over the last few months the commercial auction returns have tended to show business is brisk for interesting, well priced commercial lots. But as we move into springtime is this trend continuing or not?

The Allsop sale last month raised £61.5m with the auctioneers saying this was the largest sale for 18 months and showing that ‘cash is in the market and ready to buy’.

The auctioneers said that the focus on larger lots continues. Fifteen lots sold for over £1m, including the largest lot sold at £4.34m (7.37% yield), being a Nuffield Health Gym in West Byfleet for a fund. The average price of £1m+ lots was £2.434m.

Allsop say that shopping centres raised a total of £12.4m. Overall there was a focus on retail property which comprised 56% of the sale, typically as mixed use assets, alongside industrial investments, offices and alternative assets which included a portfolio of vet centres sold at an average of 6% net yield.

Other sales of note included a parade of 10 shops and 16 flats at Barkingside sold at £3.9m and a shop and nine flats in Stow on the World sold for £3.25m.

George Walker, Auctioneer and Partner at Allsop, commented: “This is a strong end to the financial year in a market which is still lacking in conviction, but the private investor is always happy to back themselves to get ahead of the market when presented with quality stock and added value opportunities.

“There is a feeling that a surge in demand will arrive once the first interest rate comes, but our results are already showing some strong prices for the best quality lots.”

At the Acuitus sale last month landmark assets in key central locations proved very popular with bidders.

In Leicester, a recently refurbished HSBC bank generating an annual rental income of £200,000, sold for £2.07m. The freehold of an Italian restaurant business sold for £840,000 at a yield of 6.63%.

David Margolis of Acuitus said: “Location is so often the key to attract potential buyers, and these two properties situated in the heart of Leicester city centre offered both attractive local geographies and extremely strong covenants from long standing tenants.”

In London, a freehold car showroom and residential investment in Hayes, UB4, sold for £604,000 at a yield of 3.47%. A freehold retail and residential property in Crouch End, N8, sold for £860,000 at a yield of 5.18%. A freehold retail parade in Greenford, UB6, sold for £1.1m at a yield of 6.5%.

Charlie Powter of Acuitus reports: “We saw significant traction in the auction room for these properties, with concerted bidding from multiple parties. This is a good indicator that the market is starting to turn a corner, and the importance of active management, sustainable rents, and change of use opportunities for potential buyers.”

Elsewhere a freehold town centre supermarket investment in Ivybridge, Devon, occupied by a Co-Op and producing annual rent of £189,000 sold for £1.57m. A prominent freehold car showroom asset in Croydon sold for £1.16m at a yield of 6.92%, which was around 15% above the guide price.

At the Clive Emson mixed sale in March some of the larger commercial lots included The Lighthouse Inn on the Old Dover Road, Capel-le-Ferne, Kent. The run down property on a 0.33 ha site benefits from uninterrupted sea views. It sold for £796,000, just short of £200,000 above the guide price. A former adult education centre in Maidstone, Kent, sold for £604,000, also around £200,000 more than anticipated. A mixed use property comprising six shops producing £34,750 in annual rent and three flats in Worthing, West Sussex, sold for around its guide at £359,000. A former social club in Portsmouth, with planning consent for redevelopment into eight dwellings, sold for around its guide price at £498,000. A substantial freehold commercial property situated in Sittingbourne, Kent, and currently vacant sold for £566,000 off a guide of just £325,000.

On first glance, a selection of lots from the March auctions tends to suggest the trend of the last few months is continuing in the commercial market – buyers are keen to buy lots that offer reliable income or alternatively good development potential.