June Commercial Property Auction Market Update

Buyers Showing Confidence… Where Price and Property Are Right

It’s probably fair to say that the commercial auctions market is entering (or maybe already in) interesting times right now. The uncertain economy, interest rates and generally declining commercial values seem to be having the opposite effect in the market to that which might be expected. Far from deterring buyers they seem to be encouraging more buyers, and different kinds of buyers, to the commercial auctions in the hope of getting good value.

Let’s take a look at what happened at the main commercial sales in May.

Allsop’s May auction raised just over £62m in total. This represented an impressive sales rate of 84%. It meant that overall Allsop raised well over £100m from residential and commercial auctions combined in a single week.

Key lots from the commercial auction included a grade II listed shop investment in Cheltenham, Gloucestershire, which sold for £1.216m (5.9% yield) while three shops in St. Albans, Herts, with ancillary accommodation above and a large yard sold for £2.41m (3% yield). A multi-let industrial estate in Ipswich, Suffolk, with 14 units totalling over 30,000 sq.ft. sold for £2.46m (9% yield).

George Walker, Partner and Auctioneer, at Allsop reports: “Agents are widely reporting low deal volumes and ever lengthening transaction times, so it is refreshing to report a solid auction market where we raised the most since September last year – the recent peak of £130m in one sale. As always, the breadth of stock sold touched nearly every sector, with strong demand for the best retail, industrial and alternatives which include two nurseries let to Busy Bees with buyers chasing yield. There were some strong prices paid with a quarter of the lots selling at 6% or better, once again confirming the cash that investors are ready to deploy for the right investment.”

The marketing for the Acuitus May sale tantalisingly promised ‘larger lots bring bigger opportunities’. That seemed to be the case on the day too with the sale raising a strong £19.05m overall.

Notable lots included a public house/hotel investment in Dorset which sold for £2.2m at a yield of 5.13%. A 10,600 sq.ft. vacant office building in Leatherhead, Surrey, sold for £1.74m. In London, a five storey mixed-use investment in Parsons Green sold for £1.56m at a yield of 4.45%. A 13,656 sq.ft. trade counter investment close to the centre of Wigan, Greater Manchester, sold for £1.21m at a yield of 7%.

A particularly popular lot – so popular buyers couldn’t even wait until sale day to snap it up – was the 70,469 sq.ft. Castle Place Shopping Centre set on a 1.73 acre site in Trowbridge, Wiltshire. It attracted more than 100 expressions of interest before selling prior to auction for around three times its guide price of £400,000.

Richard Auterac, Chairman of Acuitus, comments: “As this sale showed, buyers are more confident in the long term prospects for assets across all the property sectors believing a pricing inflection point has been reached. Notwithstanding the latest Bank of England interest rate rise, this positive belief led to the strongest buyer interest across the board since last autumn.

“Part of the success was attributable to the quality of assets at this auction where prices have remained firm and transactions occur smoothly and quickly. This is giving rise to more sellers bringing the higher quality assets to auction in order to capitalise on serious investor demand which remains unabated.”

Savills held not just one but two mixed auction sales this month, on 10 and 31 May. Highlights from the commercial lots included a student block in Ipswich, Suffolk, which sold in excess of its £2.15m guide price prior to the auction, two mixed-use buildings in Brompton, Kent, which sold above guide price for £487,000 and a three-storey former bank in Horley, Surrey, town centre which sold above guide price for £530,000. A plot of land in West Drayton, Greater London, sold over guide price for £532,000.

The SDL Property Auctions mixed sale in May saw a number of commercial properties sell for well above their guide price. A lot in Halesowen, West Midlands, sold for £264,000 from a guide price of £185,000. Another lot in the same town sold for £650,000 from a guide of £575,000. A lot in Hanley, Staffordshire, sold for £410,000 from a guide price of £296,000.

A commercial property in Barrow in Furness, Cumbria, sold for £131,000 from a guide of £100,000 (although another in the same town only sold for £55,000 from a guide of £55,000). The highlight of the sale was probably a former youth centre in Dudley, West Midlands, which sold for more than double its £150,000 guide at £326,000.

As the auctioneers always tell us, there is rarely any lack of interest in an attractive auction lot that is competitively guided. That certainly seems to be the case this spring, with no shortage of buyers for commercial lots where the price is right.