- Retail sector remains dominant, comprising 72% of sales compared with 67% in 2017
- Increase in local domestic buyers looking for opportunities close to their home
- 529 properties sold for £321m in H1 2018 compared with 562 properties sold for £357.76m in H1 2017
- With rising demand high-quality lot yields harden from 5.77% to 5.65%
- B-grade assets soften from 8% to 8.5%
- Some of the best lots with yields down to 3.5%, mainly comprising lots in London and the South East
Allsop reports in its Commercial Auctions Summer Review 2018, an analysis of its commercial property auctions for the first half of this year, that the commercial property market remained resilient despite news of High Street woes and ongoing BREXIT uncertainty.
Despite a more cautious market, demand for high-quality lots increased which has resulted in hardening of yields as investors purchase locally rather than venturing further afield.
Commercial auction market activity for the first half of 2018 was only slightly less than the first half of last year with 529 properties sold in H1 2018 compared with 562 properties sold in H1 2017 with the value of sales being £321million for H1 2018 against £357.76 million in H1 2017. The success rate for H1 2018 at 84% was only slightly down on H1 2017 at 86%.
Investors as a whole are turning to quality, resulting in the yields of high-quality lots, those in good location with secure tenants let at market rents, hardening from 5.77% to 5.65%. In contrast, yields for B-grade assets softened from 8% to 8.5%.
Concerning regions, investor demand remained focused on London and the South East with initial yields of some of the best lots down to 3.5%.
Retail remained the dominant sector, comprising 72% of the total auction sales value or £229 million, against 67% the previous year.
Investors are tending more to invest locally rather than venture further afield with local investors making local purchases increasing from 36% in 2017 to 45% in 2018.
However, the survey further reinforces market optimism with 89% of buyers intending to purchase another commercial property in the next 12 months compared to 80% in H1 of 2017. There is also increasing demand for larger lot sizes with 37% of buyers looking to invest £1 million plus in any single property against 27% last year. This might reflect the increasing volume of larger lots at auction. Demand for mid-size lots remained strong with 57% of investors seeking to purchase lot sizes from £250,000 to £1 million.
Patrick Kerr, Partner, said: “Investors in the commercial auction market represent a wealth of accumulated knowledge and they remain committed to retail property investment. However, to reduce risk there is a tendency to invest more in the market they know, which means locally, and in high-quality assets in great locations with relatively bullet-proof tenants on long leases. But, there is still interest in assets with more risk as long as the price is right.”
“We are also noticing stronger interest in mid-priced commercial lots from those looking at alternatives to residential buy-to-let and we expect this to continue.”
“Overall, with the uncertainties of BREXIT and of the High Street we expect the investor push for quality to continue along with a low-interest rate environment making commercial property sector as whole attractive to investors.”
Notes to editor
About Allsop auctions
Allsop run the largest property auction departments in Europe through two highly experienced residential and commercial teams and is the UK’s number one auction house by transactions. We offer a wide range of lots covering residential vacant and investment properties, ground rents, land and development opportunities and secondary commercial lots. A minimum of six commercial and seven residential sales are held every year. Visit: http://www.allsop.co.uk/our-services/auctions/selling-at-auction/
Allsop is an independent property consultancy with a market-leading reputation for high quality service and integrity, covering the UK from our offices in the West End, the City, Leeds and Brighton. In addition to our position as the UK’s largest and most successful property auction house, we offer an extensive range of services for residential, commercial and mixed use property.
We have the people, the skills, the experience and the drive to maximise value for our clients in any given market and like to do business in our own distinctive Allsop style – open, friendly and honest. Clients appreciate this, which is why so many stay with us over the long term.
In an unpredictable world, Allsop remains a reassuringly constant source of market knowledge, insight and expertise. Visit: www.allsop.co.uk
For further information or supply of images contact:
Redleaf Communications on 020 757 6893 / email@example.com .
Or May Dalton, Commercial Marketing and PR Manager at Allsop on 0207 543 6777 / firstname.lastname@example.org .