October Commercial Property Auction Market Update

Commercial Property Auctions Market Also Setting Records 

With few commercial properties brought to auction over the summer September always tends to be a ‘catch up’ month with a large number of properties offered. This September proved to be no exception. More interestingly, however, the largest commercial auction houses (similar to residential) all reported record results this month … if in different ways.

The September Acuitus auction was their largest for three years. The total amount raised was the highest amount by the close of an auction since before the pandemic. It raised £31.39m with an 85% success rate and an average lot size of £826,000.

Notable sales included five trade counter investments let to Travis Perkins with sale prices ranging from £1.22m-£1.95m. A ‘top of the range’ motor trade investment, operating as a Kwik Fit, in Nottingham city centre sold for £955,000 at a yield of 4.9%. An Odeon cinema in Hastings sold for £2.25m. Five public houses let to Stonegate sold prior to auction for in excess of their guide prices. The auctioneers also reported strong demand for retail assets.

Acuitus Chairman, Richard Auterac, commented: “This was an extremely strong result for high quality institutional-grade assets, the calibre of which the auction market hasn’t seen for a number of years.

“There is clearly a substantial amount of latent demand in our market and an increasing group of committed sellers. The challenge remains ensuring that pricing is precisely calibrated to meet the expectations of both parties and the success of this auction showed our ability to do this.”

The Allsop September sale raised £36m from the sale of 63 lots across the UK – a success rate of 83%. The sale produced the highest overage above reserve for some time at 14%.

The auction offered a range of properties from mixed-use residential development and commercial assets to high street parades including one with a Tesco in Wallington, Surrey, which sold for £2.1m. Among the most popular lots on offer was a portfolio of 10 dental surgeries across the south of England, which all sold at an average yield of 5.8% net, 17.5% ahead of the reserve prices. Eight lots sold at £1m or more.

George Walker, partner and auctioneer at Allsop, said: “Buyers have become increasingly selective as the year has gone on, as the market waits for any sign of the peak in interest rates – which may now have arrived with the monetary policy committee holding rates at 5.25%, ending 14 months of increases.

“From our September auction catalogue, we have to date sold 63 lots where the sellers were prepared to listen to the market and where buyers seem increasingly to be sensing a strong opportunity. This competition generated the highest overage above reserve for some time, averaging 14%, which proves the principle of realistic pricing at the outset.

“With a wide range of cash savings accounts now offering a risk free 6% return for 12 months, yields have shifted out to allow for the risk premium on their cash, essential for long term investment, unless buyers are able to add value to the opportunity.”

Two Savills mixed sales in September raised over £85m. Interestingly this was over twice the amount raised in September last year, and twice the number of property sales.

Notable commercial, development and mixed-use lots included a historic gun tower with its iconic ‘No. 1 The Thames’ address in Kent which sold above guide for £159,000. A mixed-use property in Worcester Park, London, sold for £1.17m significantly over its £750,000 guide price. An office property in Hastings sold for £1.11m. A former warehouse/factory in Hackney sold at guide for £1.95m as did a residential investment in a former school in Plymouth which sold for £1m.

Auctions Director Jeremy Lamb at Savills said: “Yesterday’s sale saw six of our auctioneers take to the rostrum over the course of the day. Quality well priced properties, whether commercial, residential or mixed-use, continue to generate significant demand and achieve excellent sale prices.

“Year to date we have sold 50% more lots than last year making September 2023 our biggest ever both by volume and amount raised, with almost 500 lots between the two September catalogues.”

One way or another, all the large commercial auction houses appear to be setting new records. But most likely this has been spurred on by a willingness to do business at competitive prices amongst sellers and buyers alike.