Commercial Auction Market
Overview
Along with the wider market, the mettle of the Private Investor has once again been tested in the first quarter of 2026, as we all navigate the transition from a moderately low interest rate environment with a downward trajectory to a less certain and more inflationary outlook.
The war escalated dramatically by the USA and Israel on 28th February will bring with it significant inflationary pressure for a sustained period, in the same way that the Ukraine conflict did in February 2022. Inflation in the UK rose then to a peak of over 11% by October 2022 although there are few commentators suggesting such a bleak outcome from this war. Nevertheless, the downward pressure on rates has reversed, and the prospect of a cut or two this year seems unlikely.
The Private Investor has long relied on the high yielding opportunities of commercial assets for income and inflationary protection, and so within a period of a few weeks we have had ring side seats to see how they react. With eight auctions a year, we get regular feedback on sentiment and data points from sales.
The context was that we were pricing assets in January and February for sale on 24 March, when the rules were changing very quickly.
Looking at one portfolio in isolation - three forecourts let to AF Blakemore on new 15 year leases with RPI reviews subject to a collar and cap of 1% and 4%.
These were priced in February in the range 6.75% to 8.25%. In the intervening period the 5 year Swap increased by nearly 8% to 4.15% from 3.8% with no apparent ceiling.
When launched the market proved receptive and all three were sold with the keenest yield at 6.6%, and an overall average of 7.3%.
Might they have achieved stronger pricing in a more benign economic and global back drop?
Probably, but of course the lease structure offered a good hedge, albeit capped, against rising inflation so the buyers of these assets are proving their long term view and the classic, almost old school reliance on good assets to stave off the effects of inflation on cash returns.
Against this uncertain backdrop, the Commercial Auction Team have sold £100M of assets in Q1 which is an increase of 5% on last year - an encouraging improvement despite the market fragility and wider downturn.
These two auction catalogues offered very different stock - there was a strong London presence in the March sale and more regional selection on offer in February.
The sector allocation was as wide as ever for buyers to look at, which is how we will review some of the examples.
Against this uncertain backdrop, the Commercial Auction Team have sold £100M of assets in Q1 which is an increase of 5% on last year - an encouraging improvement despite the market fragility and wider downturn.
These two auction catalogues offered very different stock - there was a strong London presence in the March sale and more regional selection on offer in February.
The sector allocation was as wide as ever for buyers to look at, which is how we will review some of the examples.
Lot 22 March sold at £1.35M 6.5% net View Lot
Sector Highlights
Mixed use assets have long been a favourite and we sold six properties in the March auction on Bute Street, South Kensington, London SW7 for £11M. All six shops had maisonettes above at. The pricing at 7% initial yield reflects a long term change in the market, and also the appeal of strong London locations to the overseas market.
Bute Street, London SW7
Long let income streams, particularly those with indexation have been popular and in addition to the three forecourt assets sold, let to AF Blakemore we have sold two Travelodge Hotels which proved popular. The Forecourt rents were in the range £88,250 pa to £94,500 pa and these sold at an average of 7.3% net initial yield with the new leases expiring in 2041.
The Travelodge Hotels in Macclesfield and Retford, both on leases expiring in 2044 sold at an average of 8.4% with the rents topped up close to the next rent review level.
Lot 44a March sold at £1.65M 8.2% View Lot
The retail sector has always dominated auction catalogues and is only selectively throwing off rental growth - the holy grail for investors.
A Tesco Express, Exeter, passing off £66,500 pa and reflecting just £12.16 per sq ft caught the imagination of buyers who competed hard to drive the price to £1,310,000 and 4.8% net initial yield, on this relatively short term certain with a tenant break option in 2034 (LEX 2039). With cap and collar RPI, the lease limited the potential to drive only an additional £13,965 pa to the rent in 2029. However this is a very long term play and proves how buyers fight hard for the best covenants available.
Lot 10 March sold at £1.31M 4.8% View Lot
Trade Counters tend to offer modern, high quality assets and our market always responds well when given the opportunity to bid competitively
This example, sold in the February sale in Eastbourne offered a new 10 year lease to UK Plumbing Services expiring 2036. The bidding was intense, driving the price from the guide of £1.6M to a sale price of £2.42M reflecting a net initial yield of 6% and £201 per sq ft.
Lot 11 February sold at £2.42M 6% View Lot
Alternative Assets
Alternative assets always have a strong following and can often offer long leases, with RPI linked rent reviews.
One example in Pershore, Worcestershire was sold in the March sale for a substantial Pension Fund, with a lease to Busy Bees Nurseries expiring 2039. In addition the RPI increases had a generous cap and collar of 2.75% and 7.5%, allowing the investor to benefit from any dramatic increase in inflation above the current norm should it come through.
This sold at £1.235M reflecting a 6.8% net initial yield - the benefit of competition at auction.
Example lot 8 March sold at £1.235M 6.8%.
Lot 8 March sold at £1.235M 6.8% View Lot
Looking Ahead
The clear take from the Q1 2026 is that there is immediate cash in the market for a very wide range of stock, across all geographies and sectors - despite the ongoing financial market disruption.
Buyers will compete hard for longevity and surety of income or where they see growth.
The Private Investor is as informed, in cash and ready to invest as they ever were and will continue to build their portfolios for the long term - they just need the opportunities to invest.
