Commercial Auction Market
The private investor finished the year with a strong flurry of late activity, with average yields holding largely steady, albeit with some weakening in the secondary and tertiary sectors.
The commercial auction team held two sales in the last quarter, as normal and raised over £190M compared to the £230M raised in the previous year, a small decline in volume in line with the wider private treaty market.
The High Street continues to dominate the headlines in the press, and coverage of the ongoing challenges are well documented. There is little sign of a halt to the decline of physical retail sales thereby impacting occupier demand and rental growth in all but the best locations.
It is therefore in spite of offering over 70% retail stock that our sales rates, now 86% for the December sale and volumes remain very encouraging, with Private Investor cash providing strong liquidity to the market.
Buyers continue to report a strong appetite to buy again in our regular survey with 19% new entrants across the year, ahead of the 15% in 2017
Pricing is key, and buyers are ever more sensitive and knowledgeable about rental levels which in some cases in the retail sector are showing very significant falls.
This is reflected in the yields. The average retail yield has gone out a little over the last twelve months from 7.3% last year to 7.7%. There is however a wider change in the secondary stock which averages 9%. This reflects increasing numbers of transactions as reported in the last quarter at very high double digit initial yields.
Buyers continue to report a strong appetite to buy again in our regular survey with 19% new entrants across the year, ahead of the 15% in 2017. Overseas buyers are more dominant than in recent years, perhaps taking advantage of the currency rates at present. Demand from our surveyed buyers is strongest for the bigger lots, over £1M and these purchases are largely funded with cash, in 72% of cases.
Looking ahead to 2019, our market has a long term and positive view and subject to the significant challenges of realistically pricing in risk and growth, buyers are keen.
Demand for the better stock and investment property less exposed to changing shopping habits remains as strong as ever, and this alternative sector will continue to have anincreasingly strong following.