Commercial Auction Market
Overview
In this quarter, the Commercial Auction market is presently trading at a level which is comparable to Q3 twelve months ago, a level that is historically lower than the five-year average, and for good reason. We observed an underlying tone of caution as buyers navigate a fluctuating economic landscape with the delayed Autumn budget in their sight which undoubtedly influenced the timing of some buyers’ decision making. Despite this, September saw us hold the largest ever dedicated Commercial live-stream auction which raised a total of £67M, proving that when pricing is accurate there is no shortage of demand and competition at auction, albeit buyers are exercising discretion when they decide where to deploy their capital.
We have seen some exceptional results across all sectors and on behalf of a broad range of sellers from REITS and Corporate Sellers to Private Investors, who are the bedrock of our market, all utilising the liquidity of the auction room and the unconditional contract to release value and get deals done.
Looking at some of the examples from Q3 will show how this cash is in the hands of experts who will willingly compete for the better stock and pay strong prices when all their requirements are met.
Total sold in the Q3
Total transactions
Average success rate
Sector Highlights
Mixed use
We mention that when all an investor’s requirements are combined in one asset, investors will compete hard, and our first example, a shop and substantial flat in Kensington demonstrates just that. A hugely popular post code, modest lot size for the location and a spread of income across the shop and residential AST.
202 Kensington Park Road, London, W11 1NR
Sold at £2m / 4.5% / £715 per sq ft View Lot
From a multi-let perspective, mixed-use parades continue to be keenly sought by Auction buyers owing to the spread of risk amongst tenants, meaning covenant strength is less important, where affordable individual rents mean there may be potential for growth, and where there is strong rental demand for residential units above. The below example in Aintree, Liverpool highlights the appeal in this sector, with the property selling prior for about 30% ahead of its Guide Price.
Churchill Shopping Centre, Altway, Aintree, Liverpool, Merseyside, L10 6LB
Sold at £ 3.1m / 9.45% View Lot
Industrial
Industrial yields are down from their peak, certainly for secondary assets. However, this modest lot size was multi let, in a strong city with a compelling story on rental growth. It achieved a price reflecting over £100 per sq ft as a result.
Units 11-13, Pembroke Avenue, Waterbeach, Cambridge, Cambridgeshire
Sold at £1.075m / 6.6% / £105 per sq ft View Lot
Leisure
Whilst there has been a lot of coverage about the impact of the increase in NIC on the leisure sector, our buyers are still drawn to good assets, particularly where there is long income.
The first example was sold for a REIT; a Travelodge let until 2044 with CPI linked reviews and occupying a very prominent road side site on the Milton Keynes ring road.
Travelodge, A5 Old Stratford Roundabout, Milton Keynes, MK19 6AO
Sold at £1.49m / 5.3% View Lot
The second leisure example is a long lease to Stonegate, expiring in 2049, with CPI linked reviews, which is a product that our market is familiar with. This one captured buyers’ imagination and achieved a market leading price.
Gardeners Arms, 103 York Hill, Loughton, Essex
Sold at £1.15m / 6.6% View Lot
Trade Counter
This is always a popular sector and the Banbury example, let to Halfords on a new 5-year lease, was sold on behalf of an Oxford College. Four bidders competed for the property at auction, including both local and overseas based buyers.
Halfords Autocentre, Marley Way, Banbury
Sold at £2.61m / 7% View Lot
Office
The price-spread on offices can be very broad, particularly for multi-let buildings where the income streams can be fragmented and short. The example we show here benefitted from a recent planning permission for part-redevelopment to residential. It had been on the private treaty market for several months and the auction process brought the sale to a successful conclusion with the purchaser being a locally based private company.
Alliance House, 29 London Road, Bromley
Sold at £3.0m / £174 per sq ft View Lot
Retail
This quarter saw a slight fall in the amount of retail sales, dropping to less than 50% of all lots sold for the first time in a while, from the running average of over 60%.
This example was an attractive building in Rickmansworth, let to the popular Nationwide Building Society until 2029, albeit with less than 2 years until the break.
Nationwide Building Society, 123 High Street, Rickmansworth
Sold at £722,500 / 5.9% View Lot
Who is buying?
The vast majority of our buyers are cash-rich private investors however, we continue to attract overseas buyers to the auction room – in the September auction nearly 20% of all sales went to overseas capital, typically with a London based property company in place.
As we say above, there is continued appetite for the best quality stock in our auction catalogues and, where pricing is realistic, this demand will be attracted to some of the more high-yielding and regional assets that we offer.
Direction of Travel
The presence of overseas investors shows that perhaps an uptick in Commercial Real Estate is not too far away, and auction buyers are often the first movers in a cycle.
It is well known that these buyers have plenty of cash and, as the immediate returns on this cash have been diminishing through a steady reduction in the interest rate over the past year, cash in the bank is becoming a less attractive proposition. When coupled with the predicted downward trajectory of the cost of money, this should provide increased motivation for our buyers to broaden their investment strategy across a wider range of assets in the Commercial Auction market as they seek appropriate returns.
The examples we discuss above show that there is good demand for the right product across all sectors and we expect this to continue to be the case in the foreseeable future. This is borne out by the results of our Buyers’ Survey where almost all respondents highlighted their desire to keep buying over the next 12 months. We believe it really is a good time to be purchasing and those that can see through the headlines and are doing so right now may just be onto a good thing.
