Commercial Auction Market
Why are the average yields achieved, unchanged over 12 months?
Average yields remain at 7% net, but lot size has reduced
Lots on in Q1 2023
Lots on in Q1 2022
The wider investment market has gone through a phase recently of reduced sales volumes, from Central London’s £100M+ assets right across the board, which is down to many things but the central theme is the cost of debt.
With base rates likely to rise again in May, yet the fixed term residential rate falling, it is not surprising that our capital markets remain uncertain.
The commercial auction market, typically transacting sales up to £5M is constrained only by lot size, not sector. These active, cash rich buyers will buy what they are offered provided the pricing reflects the perceived risk and return – it is what they do.
So, what is the bell weather of the market telling us?
The data from the market as a whole in Q1, (provided by EiG with thanks) shows a 6.9 % increase in lots offered, ahead of the 6% growth over a 12 month period.
This modest increase is probably not enough to indicate a change in sentiment from sellers who need to sell, and we are not seeing a significant increase in distressed sellers in the commercial sector at all.
Against the background of rising volumes being offered is a falling sales rate. This is a unique aspect of our market where clearance rates are very public and allow commentators to assess whether the initial view of pricing on instruction is correct three weeks later. This is the indicator that is falling.
Published sales rates are down to 70.8% in the quarter, a 10% fall from Q1 2022.
As an annual figure the industry average is now below 70% from 77% last year showing a gap between Sellers’ aspirations (and Auctioneers’ judgement) and the Buyers’ appetite.
Allsop Commercial Team I hasten to add has been running at 85% in Q1, which is now at 90% having sold every lot offered in our April 20th auction.
The other point to explore is pricing, and to assess this I am going to examine just the Allsop data set, which includes a total of 198 lots sold in Q1 compared to 167 in 2022.
The average yield of all lots sold has dropped from 7% net to 6.8% this year. Taking out a ground rent portfolio this reverts to 7% which still seems strong in a tough market when yields are rising everywhere else.
There are three portfolios which have sold very well and have kept the average yield low.

Bromley Council
Raised £15.5M from 14 secondary retail parades where the rents were reversionary. The biggest lot was £4.015M, the average price £1.11M and yield 5.8% net.

Bournemouth Council
We sold 13 industrial ground rents, raising £5.857M at an average yield of 3.3%, in the range 4%-2.37%

William Hill
Sold 73 sale and leasebacks during this period, before the April sale when another 57 were sold. These were very small lots and the new buyers we found were typically very bold and clearly not restrained by borrowing as they bid down to 3.5% for this tertiary retail, at an average of 7.5%.
These portfolios are just a sample of the 198 assets sold but serve to prove how much liquidity there is in our market for the right stock, and to reinforce the earlier point – that our market is not sector specific but driven by opportunity and cash.
The last point is of course pricing, and these vendors were committed sellers, allowing realistic pricing and the market to find its level, an essential aspect in driving buyer demand, whatever the asset.