February Commercial Property Auction Market Update

A Month to Reflect on the Market

As with residential sales, January is a quiet time of the year for commercial auction sales too. However, that does offer a convenient opportunity to review commercial auction sales over the last year and to take in some forecasts.

In their latest Commercial Auction Outlook Allsop say 2024 was a record year for their business. They point out that key trends in this market have been ‘bigger lots’ with a ‘central London focus’.

George Walker, Partner & Auctioneer, says: ‘Whilst yields have moved out in the last 24 months the depth of demand for the best assets will ensure that prices strengthen once rates begin to fall, and the timing of that is still not clear.

‘With higher than anticipated rates investors are also able to secure a risk free return approaching 5% which is tax free for the individual if invested in Gilts. These investors are clearly in cash and as we have seen in a good number of examples, will pay strong prices where they see the opportunity to add value and enhance the asset.

‘The Budget has made things harder to interpret looking ahead and from April most businesses will be bearing higher wage costs which will have an impact on their growth – not what the Chancellor has said that she wants.

‘The real impact of the Budgetary changes will of course take many months to come through, and meanwhile the Treasury’s most recent monthly compilation of forecasts suggests an average growth this year of 1.3% with the OECD higher at 1.7% which is encouraging.’

At Acuitus their latest Commercial Property Auction Data (cPad) Report says: ‘The UK commercial property market is undergoing significant shifts, as evidenced by the latest data and trends observed in 2024.’

The report says that key trends in the market include a shift away from retail-dominated sales toward alternative sectors …. for the present. And a broader role for auctions as a platform for diverse property transactions. It says that there is continued strength in London as a prime investment destination and a sustained interest in high lot size properties from cash rich investors, despite economic challenges. There are ‘diverging yield dynamics’ between prime and secondary assets.

The report also says that these trends reflect a broader rebalancing by investors as they adapt to evolving market conditions. It adds that, as the market enters 2025, resilience, diversification, and a focus on quality will remain central to investment strategies, shaping the future of the UK commercial property sector.

Speaking ahead of their February auction Richard Auterac, Chairman of Acuitus, comments: ‘The economic backdrop has played a crucial role in shaping the commercial property market and following the ‘Reeves Budget’ the UK economy has faced headwinds. However, there are reasons for cautious optimism. Investors expect the cost of finance to fall this year and consequently they remain hopeful of an early cyclical uptick. There are plenty of funds available to be deployed for correctly priced assets.’

The Savills mixed sale at the end of January offered a number of commercial lots. A high street retail investment in Colchester, Essex, generating £62,500 pa in rent sold for £731,000. A social club in Shipley, West Yorkshire, sold for £504,000. A retail investment in central Nottingham, generating £24,500 pa in rent, sold for £276,000 while an adjacent property generating £24,000 sold for £261,000. A retail property in Truro, Cornwall, rented at £50,000 pa sold for £624,000. A mixed use investment in Barnet, London, earning £47,940 pa sold for £600,000. A pub investment in Gainsborough, Lincolnshire generating £57,000 pa sold for £476,000.

Perhaps the most interesting lot at this sale was a substantial freehold mixed use retail, residential and workshop/industrial premises comprising a former piano factory/showroom on a 0.53 acre site in London N15. The hammer price was a sizable £5.81m.