Commercial Auction Market
Overview
The Commercial Auction market is set to report modestly reduced volumes at a time in the market when many capital markets are trading at historic lows, our market is down by 2.6% year on year with £1.119Bn traded to the end of June.
From an Allsop perspective, we have just had a strong July sale, and as this is written we have raised £291M for the year to date which is 8% ahead of the equivalent in 2023.
On further analysis the wider success rate overall has fallen despite the lower volumes it is now down below 70% across the sector, whilst the Allsop success rate figure has held up at close to 90%.
The Allsop results have seen another factor which continues to develop; the rising lot size which has broken new ground this year with seven Lots selling at over £4m;
- 40/41 Pall Mall, SW1 at £10.8M
- Larkswood Leisure Park, Chingford, E4 in the region of £7.5M
- Nuffield Health, Stoke Poges at £5.71M
- Nuffield Health, West Byfleet at £4.34M
- 8-9 Lovat Lane, London, EC3 at £4.26M
Before February 2024, it was two years earlier when we sold a lot in Camden at £8M.
This has increased the average lot size in the commercial room to £839,000 from £636,000; an increase of 31% from 2023.
Why is this? We think it is down to the weaker market ironically, where Vendors have lost patience with a long sales process and lack of urgency, they have taken the decision to get the property sold. The buyers welcome access to these bigger lots, across all sectors and we see the trend continuing to develop.
One example was the sale of 40/41 Pall Mall, SW1 sold for Liquidators in June at £10.8M, it was launched six weeks earlier and sold at auction in competition. This was the biggest lot sold under the hammer ever. When pitted against the average time for even a small transaction in the West End market is over 6 months, the appeal of the auction route is clear.
Earlier in the year was the sale of the Nuffield Health in Stoke Poges, Bucks which was let until 2050 with annual CPI increases and occupied a substantial site of 4.5 acres. It proved to be hugely popular with a wide range of buyers, nearly 100 legal packs were downloaded during the marketing period, and we ended with 12 registered bidders on the auction day and an eventual sale price of £5.71m.
Amount raised so far in 2024
Increase of average Lot size
Lot 26 June: Pall Mall
Other Headline Deals
Whilst there are few portfolio sales; sellers being mostly one-off Vendors, the one portfolio that has generated some very strong demand has been a UK wide portfolio of KFC Drive Thru Restaurants. These have all been let on long leases, 2040 and beyond with CPI increases.
The first batch of five sold in June at an average of 6.6% with bidders switching between lots during the auction to try and secure at least one on them.
We then offered a further tranche in Scotland on similar terms, and set a new high for us north of the border in Inverness at 6.5%, with the overall average yield being 7.1%.
Investors were drawn to the strong covenant, long leases, CPI increases and of course a popular sector which is rarely available to the Private Investor as many are held by listed owners in their portfolios.
Lot 42: Inverness
Who is buying?
Private Investors are a wide base of buyers who tell us through our survey that at least 70% want to keep investing.
The bigger lots have drawn in some overseas buyers, who have been busy historically and we anticipate seeing more of them as the market continues to evolve.
Direction of Travel
As with all capital markets, the first move of rates will mark the end of a long period of speculation, but we do not believe demand will change dramatically.
Buyers are used to the higher rates and pricing has factored this in. Whilst any rate reductions will be welcome, it could also signal an easier finance market which again, would be welcome.
More analysis will be available from our Summer Review, to be published at the end of August.