This Lot set a new record
Competitive bidding sees new highs in auction rooms as investors shrug off the jitters, writes Charlie Jacoby
TU R M O I L I N the Eurozone and the falling price of oil are seeing money l e a v e s t o c k s and shares — a nd s o me o f it is finding a home in property. Meanwhile, the run-up to the General Election is traditionally a drag on property sales of all kinds. This market should be a tale of two economic drivers.
At the pension-fund end of the auctions market, poor performance of equities is helping to produce record sales of property at auction. Investors want somewhere to put their money where — they hope — it will grow.
At the bargain-basement end, there has been a slight slowdown in the boom of early 2014.
Richard Auterac, of specialist commercial property auction house Acuitus, says: “The current economic climate is very reminiscent of 2011/12 when Greece was first on the verge of a Eurozone exit. However, today investors are also increasingly nervous because of the oil-price situation and are looking for more stable, tangible investments.
“We saw a surge in overseas private investor money then — and this could easily be repeated — but today the commercial property outlook is more certain, equity is more plentiful and the lending market which was nonexistent then has fired up again.”
Last year, Acuitus sold more than £240 million of properties on behalf of clients, a 30 per cent increase on the 2013 sales volume. At its December 11 auction, several lots sold at substantially above their guide prices and there was demand for assets from across the sectors and from throughout the UK.
The sale started in dramatic style with a freehold retail and residential investment in London’s Covent Garden selling at a yield of 2.5 per cent. Comprising a ground-floor shop with two flats above, sold off on long leases and currently producing income of £30,200 a year, 63 St Giles High Street sold for £1.21 million — almost twice its £630,000 guide price.
The highest price achieved in the auction also involved a London lot. Going for £2.76 million, it was a parade of 18 shops in Southgate, with the flats above sold off on long leases and currently producing income of £204,325 a year.
Office properties were also very popular with buyers. Beta House in Bradford — a 12,171 sq ft office building, let to Yorkshire Building Society and Yorkshire Housing — sold for £630,000, exceeding price expectations by some 27 per cent.
Oriel House, in Northampton’s Sheep Street, comprises 10,042 sq ft of offices behind a period façade. It also sold for £630,000 — surpassing its anticipated price by 48 per cent.
Mr Auterac observes: “Commercial property auctions have sold more than £1.3 billion of assets this year and brought hundreds of new investors into the UK investment market. The sector can head into 2015 with confidence, founded on growing investor interest, an increased supply of good quality stock and more freely available finance. The secondary market must still be treated with caution but, as Acuitus’s last two exceptional auctions have shown, being able to bring the right assets into the sale room at the right price and fully expose them to the market will meet the needs of both buyers and sellers.”
When it comes to the oft-repeated view that the election will cause the market problems, Jonathan Ross, of auctioneer Barnett Ross, has his reservations. “There always seems to be something looming that could give investors a reason to sit on their hands and not do anything. But from what I seen so far, we have had a reasonable response to the start of the year. There are lots coming in for the February auction. I can’t see any change to the level of activity we saw last year.
“Over the past three or four months, it was noticeably busier. The volume of lots is still quite low by comparison to some years.
“But we still ended up with some very nice instructions, and a lot of new faces in the auction rooms. Many of them have come back from the residential market, deciding it is way too hot and they want to get back into commercial at seven or eight per cent, instead of two per cent.
“Investors will still have their ‘dabble’ in equities. I am not certain that some of the new buyers are coming in because they are fed up with equities. They will either be paying 100 per cent cash or ensuring they have their funding in place. Nobody wants to lose their deposit.”
Mr Ross’s main concern is finding lots. “Commercial property in London is performing well,” he says. “Many people don’t want to sell. It means buy- ers are looking again at regional commercial at double-digit yields.”
Barnett Ross made the UK’s biggest ever single sale at auction in 2014. Gwalior House in Southgate, London N14, was offered for sale in May. Comprising an unbroken block of 54 flats and 25 garages, the property sold for £13.75 million.