August Commercial Property Auction Market Update

A Good Month To Look At The Market

With both big commercial auction houses in action this month, holding the last big sales before the traditional summer slowdown, it provided a very good opportunity to get some great insight on progress in the commercial market this year.

The Acuitus sale sold 100% of the lots offered (the first time this had happened in over 18 months) and raised £18.76m in the process.

The sale revealed some interesting trends: The auctioneers said that the demand for builder’s merchant investments was again strong, following the successful sale of similar assets last year. Eight of nine former funeral parlours offered in the catalogue were sold on behalf of a major corporate client with locations around the country – a property in Croydon sold well over its anticipated price with the auctioneers saying that buyers were motivated by its development potential.

Acuitus say that the residential element of mixed use properties continues to generate strong demand. For example, a mixed use asset in Slough comprising a ground floor shop with the upper floors having been granted planning for flats sold for £752,000 at a yield of 5.3%. In Radlett, Hertfordshire, a mixed use property sold for £668,000 at a yield of 6.1% comfortably ahead of the guide price.

Richard Auterac of Acuitus summarises: “Our investors have been waiting a long time for some certainty to return to UK PLC. Post the decisive general election result we are expecting investor confidence to continue to strengthen over the summer. Feedback from our clients also suggests the market will receive a further fillip once the interest rate reductions kick in. Heralded by the 100% sale rate of this auction, we could be seeing, at long last, a turn in the market.”

The Allsop commercial auction raised £54.5m from the sale of 65 lots representing a strong 80% sales rate. Eighteen lots sold for £1m or more with the average lot site being around £839,000. The bulk of the lots sold were retail, with the auctioneers saying this confirms buyers’ appetite due to the consolidation of this sector.

The largest lot sold was the Archbishop Tenison’s School in Kennington, overlooking the Oval cricket ground, which sold for £7.87m. Other highlights included a children’s nursery in Gloucester which sold for £1.1m (7.2% yield). A mixed use, tertiary industrial investment in Mansfield sold for £1.7m (11% yield). A let drive-through restaurant in Inverness sold for £950,000 (6.6% yield).

George Walker, partner and commercial auctioneer at Allsop, said: “There seems to be a sense of calm following the predicted result of the General Election, with less anxiety about the path of interest rates, as buyers sought out the better stock.

“Selling the former school overlooking The Oval was a highlight as it is a high profile site and the process drew out various special purchasers including The Duchy of Cornwall and others who had been interested in buying it for some time – sadly we can only sell it once!

“We set a new high for retail in Scotland with the Inverness KFC Drive Thru achieving a 6.6% yield in fierce competition, which just confirms how keen buyers are to add well let, secure and modern assets to their portfolios right across the UK.”

Business also seemed brisk at the Bond Wolfe mixed sale. They sold all the nine Birmingham City Council properties offered raising £2.12m in total. Key lots included a former children’s home in Birmingham which raised £585,000 and a Sparkhill retail unit with accommodation over which sold for £550,000. Other highlights included Our Lady Convent in  Southam, Warwickshire, which sold for £525,000 with planning for ten units. A freehold retail investment in Cheltenham sold for £214,000 well over its guide of £90,000+. A retail unit with upper floors in Redditch sold for £220,000 and a former bank in Malvern sold for £290,000 just over its guide of £275,000. A leasehold investment in Rednal with an annual rental income of £15,600 sold for £45,000 just over its guide of £40,000.

The commercial auctions market has been on something of a roll this year, and even the uncertainty caused by the election period seemingly did not affect the market at all. It certainly seemed to keep rolling on in July with some strong results from the main auction houses.

Seasonal trends, however, mean that the coming month will almost certainly be slow for the commercial market – with very few properties likely to be offered let alone sold. That might be a good time though to review the overall market so far in 2024 and look at prospects for the year ahead.