July Commercial Property Auction Market Update

Buyers Keep On Buying!

As with the residential market, there was a possibility that the commercial auctions market in June 2024 might be affected by the general election announcement, and buyer/seller sentiment resulting from it.

In the event there didn’t appear to be any negative impact however. Demand appeared to be strong for both secure investment properties – as well as those which perhaps involved more of a gamble but which had good development potential and/or offered strong yields.

The Allsop commercial auction raised £47m, with an average lot value over £1m. The sale of 40/41 Pall Mall in London, on behalf of liquidators, was a highlight. Strong bidding pushed the price to £10.8m.

Outside Central London, another highlight was a portfolio of four KFC drive through units let on long leases with KFC GB as guarantor. Bidding was again strong as investors sought exposure to this sector with a high profile tenant and the average sale price per lot was £1.32m. While in Gerrards Cross, Buckinghamshire, a bakery let on a long lease to expanding chain Gails Bakery at £72,500pa alongside two maisonettes sold for £1.24m, a market leading 5.5% yield.

George Walker Partner and Auctioneer at Allsop comments: “These peaks of demand in Central London and the regions confirm that the private investor is waiting to compete for the better quality assets at auction, to improve their portfolios and build strong income. These yields, nine of which were 5% or below simply don’t allow financing but buyers are content with adding real quality to their portfolios as they have faith in the diversity of their assets.”

The Savills sale this month listed a number of interesting commercial lots. Amongst the larger lots was a mixed retail and residential building in Finchley, London, which sold for £1.13m. A batch of three retail units on Keppel Road, London E6, said to have either commercial and/or residential development potential sold for £230,000. A prime retail unit in Truro, Cornwall, sold for a sizable £699,000. A vacant Victorian school building in Dorking, Surrey, sold for £329,000.

Many of the smaller lots showed that high yields are available to investors willing to take on this type of property. A small shop unit in Rhyl, let to a small independent retailer, sold for just £34,000 representing a yield of almost 10% on investment, while the adjacent shop sold for £43,000 which represented a 12.7% yield. A retail unit in Bridlington, East Yorkshire, sold for £88,000 representing a 13% yield.

The next Allsop auction at the end of the month already includes a number of larger, higher-value commercial lots.

In Nottingham, Auction Estates raised £5.05m from their mixed sale in June. Some notable commercial lots included a 0.38 acre plot of land in Awsworth, which had a guide price of £45,000, but which eventually sold for an £92,500. Another standout sale was a 0.85 acre parcel of freehold industrial land on the Hallam Fields Industrial Estate. With a guide price of £195,000, the property saw very competitive bidding and eventually sold for £377,000. Former bank premises in Leatherhead, Surrey, attracted bidders from across the UK and they eventually sold for £320,000 from a guide price of just £200,000. The auctioneers reported that ground rent investments ‘sold robustly’, despite a general decline in this market segment due to recent leasehold reform legislation.

Paul Giles, Head Auctioneer at Auction Estates, said: “We are immensely pleased with the outcomes of our June auction. The uncertainties brought on by the election have not deterred the confidence our buyers have in the properties we bring to market. The vigorous bidding we saw today, both in person and online, is a testament to the trust and excitement that our auctions generate. Our team’s expertise and strategic property selections have played a crucial role in these successful outcomes. As we look forward to our next auction on August 15, we are committed to continuing this momentum and delivering exceptional opportunities for our clients.”

Looking ahead, the general election result will probably be known by the time you read this. So next month’s commercial auction returns should give us a little more idea of how buyers and sellers are reacting to the reality of a new government.