July Commercial Property Auction Market Update

Commercial Property Auction Buyers Continue To Be Optimistic

As we’ve noted in recent updates, certain sectors within the commercial property market are enduring tricky times right now – with doubts over the future direction of commercial values. While that might not be such a positive for sellers it can help to boost the market by attracting buyers looking for a bargain.

Now we’re half way through the year it might be a good time to look at both recent auction results and at what the commercial auctioneers think might happen in the market in the rest of 2023.

As usual Savills held a mixed commercial, industrial and residential sale at the end of June. The event raised over £33.6m in total from the sale of 101 lots with a 70% sales success rate. Savills has raised £260m from 750 property lots via live streamed auctions during the first half of 2023, which is 25% up year on year.

On the commercial side, key results included a pair of three storey freehold terraced buildings with development potential in Tooting Bec, London, which sold for £1.55m – a very sizable £700,000 over guide price. A newly constructed block of four flats in Chigwell, Essex, sold for £1.2m against a guide price of £1.05m. A modern freehold office building in Barnsley, South Yorkshire, sold prior to the sale in excess of its £1.9m guide price.

Savills Auctions Director Jeremy Lamb says of the market as a whole: “Yesterday’s auction was an important milestone marking half way through the year in which we have raised over £260m via our market leading live stream platform. We are delighted to have sold 750 residential, commercial and mixed use lots across the UK for our clients so far this year.”

He continues: “We continue to see appetite for property despite further interest rate rises. Yesterday’s auction saw the hammer come down on 101 lots and many well-priced properties achieved in excess of their guide prices showing that buyers are still eager to transact and place their confidence in bricks and mortar.”

The recent Allsop commercial auction at the beginning of July raised £39.39m. Interesting lots which sold on the day include a central London freehold restaurant and ground rent investment which sold for £645,000 at an initial net yield of 7.81% and a freehold shop in London SE9 which sold for £652,000 at a yield of 5.54%. Long leasehold shop investments in Fareham, Hampshire, sold for £725,000 with a yield of 11.17% and a freehold shop investment in Dewsbury, West Yorkshire, sold for £306,000 offering an impressive net yield of 18.97%.

In their recent Investment Market Update H1 2023 Allsop say of the commercial market at the moment: “It is striking to see transactional volumes down by as much as 60% at circa £13bn which is significantly less than the long term half year average of £25bn-£30bn.

“The industrial, retail warehouse and food store sectors have remained popular with investors, and we have witnessed some yield compression since the start of the year.

“The market has been dominated by overseas and private buyers who account for approximately 70% of all purchases.”

Auction House London’s last sale was also a mixed one. It raised £24.32m in total with a success rate of 82%. A few notable lots sold at the event included a commercial investment in Wandsworth, London SW8, offering a rental income of £12,000 pa. From a guide price of £95,000 it sold for £145,000. A vacant retail unit with potential for conversion to residential use in Kingston upon Thames, Surrey, sold for £150,000 from a guide of £135,000.

In Whitehaven, Cumbria, a vacant shop previously let at £27,000 pa and with planning consent for conversion into two flats sold for just £59,000. This perhaps underlines the investor interest there seems to be at the moment for picking up good value commercial buildings that have potential for residential conversions.

Lastly, major commercial auction house Acuitus didn’t hold a sale last month. Their next sale is later this week. However their latest Commercial Property Auction Data (cPad) report shows that the first quarter of 2023 saw 287 lots sell at auction for a total of £175m. The report notes this was significantly above the 10 year Q1 average of £150m.

The cPad All Property prime yield and secondary yield have remained largely unchanged with prime at 6.06% and secondary at 9.38%.

Acuitus Chairman and Auctioneer Richard Auterac says of the commercial market at the moment: “Since the end of the first quarter of 2023 a steady increase in optimism across the market has been seen, and one would expect to see a further rise in market activity leading up to the summer.”

Freehold Retail and Residential Investment in South London (Tooting) Available at Auction in July 2023