December Commercial Property Auction Market Update

A Nervous Market?

November’s commercial auction sales took place following the tax rises, particularly of Capital Gains Tax and employer’s National Insurance, announced in the October Budget.

Did this affect activity in the market? The auctioneers seem to suggest it did make buyers consider their options …. but plenty of business was done nevertheless.

Latest returns from the November Allsop sale show that it has raised over £54m from the sale of 63 lots. The December sale also looks like it will be a sizable one too. There are already 68 lots in the catalogue and over twenty of them are guided at £1m or more. The lots on offer are being marketed for a wide range of sellers including funds and REITS, and the catalogue also offers several sale and leaseback opportunities.

George Walker, partner and commercial auctioneer at Allsop, comments on the November commercial results and looks forward to December: “The then-pending government Budget announcement cast a cloud over the market, but on the day buyers responded well. We saw many familiar faces bidding for the first time in a few years – a clear sign they see the market improving from here.

“Rates clearly won’t be falling as fast as some had suggested, with the Budget introducing new inflationary pressures. However, they are falling, which should strengthen demand for our final sale of the year on December 11th.”

The Acuitus sale saw the sale of £13.55m of property and a success rate of 95%, with London supermarket investments and commercial ground rents proving popular.

Following the sale Richard Auterac of Acuitus commented: “Despite some uncertainty following the Budget, these results reflect the continuing momentum within the commercial property auction market. Secure assets with strong covenants continue to attract investors and this is being reinforced by pricing levels which meet their investment criteria. The depth of investor interest for the ground rents and the significantly higher prices achieved than expected may for some investors be due to the tax differential between capital gain and income.”

Notable commercial lots from the Savills mixed sale included a parade comprising five shops and a kiosk in Harrogate, North Yorkshire which sold for £2.75m. A mixed use property in Kilburn, London, with a rental income of circa £86,000 sold for £1m. Another mixed use property with refurbishment potential in Balham, London, also sold for in the region of £1m.

Ben Hodge, Director (Auctions) at Savills said: “We saw particularly strong performance across the commercial and development sector and buyers with significant budgets were keen to secure top-tier stock in key regional towns and cities that offered an asset management or development angle. The interest in these markets signalled that there is a sense of medium term positivity among investor buyers wanting to acquire property that offers value-add opportunity.”

Looking ahead, the main large commercial auction houses have sales later this month – before the traditional pause in the market which usually happens first thing in the new year. So it will be interesting to see who buys and sells, what they buy and sell, and the prices that they pay then. Given sentiment in the market since the October Budget anything could happen!