January Commercial Property Auction Market Update

Goodbye 2023 – Hello 2024

After an eerily quiet few weeks the commercial auctions market came back with a bang in December 2023. Both of the big two commercial auctioneers held major sales and a number of mixed sales included a wide selection of commercial lots too. Here’s our summary of the market at the end of 2023, and some expert thoughts on this market for the year ahead.

The Acuitus sale raised £10m with an average lot size of £717,000. Key lots included a long leasehold supermarket on New Kings Road, Fulham, London, which sold for £1.51m (7.72% yield), and public house investments in South Woodford and Leeds which sold for £1.39m and £1.28m. A trade counter investment in Sleaford, Lincolnshire, sold for £1.1m (5.95% yield) with the auctioneers commenting that trade counter investments have been particularly popular over the last year.

Richard Auterac, Chairman, says: “Bearing in mind the continuing political, economic and financial turmoil this year that has led to considerable disruption in the wider property market with declining transactional volumes, our results have been resilient. For comparison, our 2022 sales were £184m with an average lot size of £810,000.

“As the commercial property auction market is able to capture transient private equity it has remained one of the few areas where there is liquidity and transactions continue to take place within defined timescales.

“Investors have been active across all commercial property sectors in the UK and there has been particular demand for assets which offer strong income flow or whole or partial conversion to residential.

“Our Acuitus investors have sufficient funds to acquire a substantially greater number of assets. Portfolio restructuring has triggered further sales by institutional owners and this has put investment-grade assets within the reach of many private investors for the first time.”

The Allsop commercial sale sold 52 lots and raised £46.6m in total. The average lot size was £897,000 with 15 lots selling for £1m+. The largest lot, Rochdale Shopping Centre, sold for almost £5m which was well over its £3.5m guide having attracted interest from over 100 prospective buyers. Other key lots included two Tesco sold leasebacks selling at £1.955m (6% yield) and £822,500 (6.3% yield), a WH Smith retail outlet in Chiswick selling at £2.4m (6.2% yield) and a veterinary practice building in Wendover, Buckinghamshire, selling at £1.25m (6.3% yield). Industrial sites in Devon and Hereford sold at £830,000 (6.1% yield) and Leominster £1.06m (7% yield) respectively.

George Walker at Allsop says: “Buyers seem to be taking advantage of the increased yield available to build their portfolios at a time when there is continued uncertainty around rates and inflation, they are chasing a strong initial yield on their cash, which seems to be plentiful given the correct price point.

“Much of the interest is focused on the better assets, or where the vendors have made a clear commitment to sell and the guide price reflects that.”

Now to look at a couple of regional auctions which mainly offered lower value lots than the big two sales.

Key lots sold at the Bond Wolfe mixed sale included Victorian grade II listed period offices in Walsall, West Midlands, which sold for £236,000 from a guide of £99,000+. Another redundant listed, period office property in Smethwick sold for £425,000. In Coventry a former united reformed church together with its meeting hall and grounds sold for £250,000 from a guide of £99,000+. In Birmingham a commercial property let to Lloyds Bank and generating £21,500 annual rent sold for £325,000 from a guide of £255,000+. A mixed use investment generating a rent of £15,000 sold for £158,000 from a guide of £120,000+.

At the Pugh mixed sale there appeared to be a lot of interest in properties with either sound investment credentials, or those with potential for development. Interesting lots included five pharmacy investments across Greater Manchester, Lancashire and Staffordshire. All of the properties had short lease periods remaining and sold readily for prices between £65,000 and £120,000. A former dental surgery with redevelopment potential in Goldthorpe, South Yorkshire, sold for £165,000. Former council offices in Rothwell, West Yorkshire, sold for £364,000 off a guide of £340,00 after receiving 50 bids. A former bank in Ormskirk, Lancashire, sold for £401,000 while another former bank in Shipley, West Yorkshire, sold for £230,000. A high street retail investment in Goole, East Yorkshire, with planning consent to convert the upper floors for residential sold for £75,000.

So what might happen in the commercial property auctions market in 2024?

It is looking like it could be a pivotal year for commercial markets!

George Walker at Allsop says: “Next year, no doubt we will see more sellers accept that the market has moved hugely in the last 12 months and to attract buyers they need to meet buyers’ expectations. This will allow the market to work, and it works at auction.”

Richard Auterac at Acuitus forecasts: “During the first half of 2024, the challenges of refinancing should continue to prompt an increase in asset sales at our auctions while the latter part of the year should see a cut in interest rates and bring greater liquidity into the market.”