The year to date -
The B word has now been replaced
by the concept of certainty or lack
of it in the market and realistically
we have been operating in uncertain
times since 24th June 2016.
In that time our market has proved to have a continuing appetite for the high yielding asset class in which we trade and robust enough to continue to trade through a generational shift
on the High Street.
Historically low costs of borrowing do seem the most certain thing at present, so the case for investing remains strong but the yield must more than ever reflect the risk to the income stream’s longevity and growth potential.
The Allsop Commercial Auction team and our clients have good reason to reflect positively on 2019 to date despite the prevailing cautionary
tone in the market.
So far this year we have sold the biggest lot ever sold under the hammer at £12.4m, a mixed use building in Covent Garden that was sold in competition at auction just one month after formal instruction.
Whilst the commercial auction market is down in volume by 17%, our figures have been trimmed by 10% compared to last year, giving our clients continued access to the busiest pool of buyers in the market.
Yields continue to harden for the very best assets, continuing the shift to quality by buyers where vendors have the conviction to offer top quality stock to a cash rich market.
All is not rosy with the retail market in particular where CVAs are now part of the landscape, with Arcadia being approved in June following Debenhams in May.
This is however now accompanied by refreshing new talk of buying by investors such as New River and Greenridge as initial yields rise to compelling levels. The popularity of the seven Shopping Centres that we have sold is an indicator that
there are plenty of opportunistic buyers in the market.
“Yields continue to harden for the very best assets, continuing the shift to quality by buyers”
Highlights of the February sale were both in London, with the £12.4m sale in Covent Garden and one of the lowest yields ever paid for an Iceland, on Caledonian Road, London N1 which sold at £2.6m, 3.6%. Appetite for alternatives was well established with a Mercedes Dealership in Weston- Super-Mare on a short lease selling at £2.585m, 7.4% and a leasehold underground NCP Car Park in St Johns Wood achieving £3.9m, 5%.
In March, the largest lot was in the ever popular convenience/ retail sector, a short lease to Co-Op in Shoreham-by-Sea that offered scope for development was sold at £3.85m, 6.3%. One of the most talked about prices was for a Specsavers in Hinckley, which sold at £636,000 at a market beating yield of 4.7%. If only one swallow could make a Summer!
The May catalogue was of more mixed quality, the largest lot endorsed the recent increase in appetite for office investments, with a 41,974 sq. ft. building in Wolverhampton selling at £3.4m, 9.1%. The bank market remained strong with 4.6%, £790,000 being achieved for a HBOS unit in Catford and a Starbucks and four flats in Camden sold at £2.5m, 5.7%.
Our Prime Minister resigned on 7th June, and the pound began its fall which may have helped our July sale, which saw a recovery in appetite and one of the busiest auction rooms this year.
The largest lot sold was Lloyds Bank on Camden High Street, London NW1 let on a short lease with 4 flats. This sold prior to the auction at a little under £6m, 4.5% which reflected both the
location and development potential of the upper floors.
Boots in Berkhamsted sold early in the sale after tremendous competition at £3.2m, 5.0% net despite the short lease, and the atmosphere got busier throughout the day. A Co-Op in Gateshead on a new 15-year lease achieved 5.4%, £1.180m reflecting the market’s ongoing faith in the convenience store sector, and a long let JD Wetherspoons in Sutton Coldfield achieved 5.7%, £1.66m which was £300,000 ahead of the reserve as the market pursued the longest let stock with vigour.
Overall the total sold for the year to date is £300M, which is 10% shy of the equivalent last year and is broken down as shown in the table on p3 of this review.
The market data suggests a 17% fall in our sub sector, and in the wider private treaty market a
reduction of over 50% compared to 2018. The efficacy of the auction room is delivering - for both the seller and investor seeking a return on cash.