The commercial property market has been through a tough time over the last couple of years.
Factors such as the decline in traditional retail have impacted demand within the sector, and altered its profile as an investment proposition. More lately, rising interest rates have added another dimension. In this report we will review how this has played out in the commercial property auctions market over 2022.
According to Essential Information Group, 3,713 commercial lots were offered over the year (up to and including October 2022). This was an 18.9% rise over the same period last year.
Of these lots, 2,860 were sold. This was a rise of 16.7% over the previous year. It represented a percentage sold of 77% – pretty much unchanged from last year.
The total raised at commercial auctions over the year was £1,118m. This represented a 14.2% rise in the value of sales over the previous year.
There were a few interesting regional variations in commercial auction activity:
Here’s what some of the large commercial auctioneers say about the market over the last year.
Reports from Acuitus suggest the market has been very buoyant.
In April 2022 the Acuitus UK Commercial Property Auction Data (cPad) report showed that the volume of properties being sold at auction in the first three months of 2022 was at its highest level since 2017.
In July cPad showed that Q2 2022 sales were 29% higher than the 10-year Q2 average.
In November the cPad report showed that auction sales totalled £275m in Q3, up 18% year on year and more than double the 10-year average for the quarter.
Commenting on the latest report Acuitus Chairman and Auctioneer Richard Auterac points out: “As sellers have become more confident that they can use auctions to tap into large pools of private equity, and in a timescale that meets their strategic needs, larger properties have been increasingly coming to market.”
Allsop has held seven commercial sales so far over the past year which have raised around £581.8m – a notable rise compared to £525.6m raised from the previous seven sales in 2021.
Their latest Commercial Auction Market Overview gives some insight into what and who is buying and selling based on the last quarter. It reports that retail property represented 37% of all property they sold, with industrial representing 17%, office 13% and leisure 9%. It says that the largest sellers were private property companies at 44%, followed by private investors at 18%, institutions at 14% and asset managers at 13%.
Allsop say that investment yields and the bank rate are key factors in the current market. However, that yields are not necessarily the driver for private buyers and that sustainable rents and the opportunity for growth are important.
It summarises that ‘demand is there in very disrupted times’ and that ‘buyers are cash rich, knowledgeable and always looking for opportunities.’
Just ahead of their final commercial sale of the year George Walker, Partner and Auctioneer at Allsop, comments on the market this year:
“Despite the challenging market conditions, we’ve continued to deliver consistent results for our buyers and sellers. Since the infamous mini-budget announcement which sent shock waves through the property industry, we have sold £80 million worth of assets, proving that there’s still ample appetite for well-located commercial property and sufficient market liquidity.”
“We are pleased to present yet another high-quality catalogue featuring a variety of assets located in prime spots throughout the UK, including London, the Home Counties and the West Midlands.”
The consensus in the sector seems to be that the commercial auctions market has been very busy in 2022, and will continue to be so into the immediate future. However, it has been stimulated by – and will continue to be driven by – attractive pricing. This has widened the appeal of some commercial property to savvy investors looking for good value.