Will deals that were once done in an auction room migrate to the virtual sale room?
There has been a great deal of talk last year of online property sales. But will the online-only auction method be sufficiently convincing to deliver organic growth in this sector? Will deals that were once done in an auction room – or indeed by private treaty or tender – migrate to the virtual sale room? The ultimate decision will be made by the sellers. And despite the hype, any transition will be influenced by one thing – results.
Don’t get me wrong, I’m a big supporter of online bidding. It’s the future. Back in 1999, Allsop was the first property auction house to offer an online bidding channel during live in-room sales. In 2013, Allsop (as part of a joint venture) introduced online-only property auctions to the Irish market. In 2015, it held the first UK online auction of new homes off-plan. Last year Allsop held its first online-only commercial property sale. So today, sellers and their professional advisers have another method of disposal to consider.
Selecting a method
As an auctioneer in a professional practice that offers all methods of sale, I have always been mindful of the importance of giving the right advice to our clients. Auction is an exceptionally powerful way to sell, but it isn’t necessarily the best option in every case. It has to be right for the asset, and also right for the client. The benefits that any auctioneer will promote include the certainty of a binding contract on the fall of the hammer, wide exposure, transparency, speed and the ability to demonstrate best price publicly. That said, if auction is considered suitable, now it seems we need to consider which method of auction.
Auction seriously delivers when competitive tension is at its strongest. The primary driver of competition is price. Access to bidding has to be easy and open to all. The multichannel auction delivers four options – in-room, online, proxy and telephone bidding.
Online is strictly single-channel. Is that a risk? It’s notable that, despite having offered an online bidding service for nearly 20 years, in our experience this is the least popular method of the four (there were 44 online bids registered at our last sale).
Most buyers like to come to the sale and experience the live event. That certainly works for me, as I prefer to make eye contact with bidders to squeeze the final bids.
Multichannel improves competition further. At our last commercial sale, for example, a buyer online in Asia fought off an investor bidding in the room. And at our most recent residential sale, a proxy bidder based in Russia narrowly lost out to a buyer in the hall.
So when should online be preferred? Some scenarios strike me as immediately eligible. For example, our new homes off-plan online auction was conceived at a time when there was truly global interest in new-build UK residential, particularly London. With up to 80% of some schemes in the capital selling overseas, it was clear that inviting investors to an auction room in London was inappropriate.
Also, it’s no secret that hiring the ballroom of Claridge’s is not cheap. But spread over 200 lots, the clients’ shared investment in the multichannel process will show strong returns. Potentially, online-only will be attractive to a single vendor selling relatively low-value lots in high volume. In these circumstances, the economies of scale are obvious. Our online sale of secondary and tertiary commercial investments for a single shopping REIT provided a lower-cost option to the client.
Until the results are in, there’s little evidence upon which to base advice to sell online only. There will be transition, no doubt, but it will not be overnight. It will be a question of balance. We shall see the use of the online channel during a room sale grow in popularity. Our fine art friends experienced this long before we did in property, but they are still firmly working their magic on the rostrum.
At the end of the day, it is all about best price. Whichever method openly and unequivocally proves that, then that’s the way to go.
Notes to editor
Gary joined Allsop in 1987 and was invited to join the Partnership in 1991. Since then, he has been head of the Residential Auction Department with Chris Berriman. The department is now the largest residential auction house in the UK and sells up to 2000 lots each year to a value of around £400 million.
Gary is vice chair of the RICS Auctioneering Group, a member of the RICS Auction Legal Review Group and a former member of the RICS Estate Agency Group. He is past chair of the RICS Agency Skills Panel and past chair of the ISVA Auctioneering committee.
Gary is the author of many articles in regular trade press, a frequent speaker at professional conferences and a regular charity auctioneer.
If you would like to get in touch with Gary, please contact him:
firstname.lastname@example.org or +44 (0)20 7344 2619