PROPERTY AUCTIONS: SPECIAL SECTION
APROPERTY AUCTION house is as much a bastion of a high street as the local bank and post office. When Jack Tobin started Strettons in Walthamstow in 1931, he may have foreseen that it would become a chain with branches around the London suburbs. Little could he imagine that it would celebrate its 90th birthday as an online property auction business.
Like so many auction houses, Strettons switched to online sales in 2020 and did well from it. The firm achieved £74.8 million for its clients, with an average success rate of 86 per cent.
In April last year, as the Covid-19 pandemic and lockdown changed life as we knew it, the Strettons auction team set about its first remote sale, live-streaming, with online, proxy and telephone bids. Overall, Strettons raised £5.7 million at the sale, with an 84 per cent success rate.
The highest price of the day was achieved for a freehold vacant pair of Grade II listed buildings, comprising four flats, on Cable Street in Stepney, east London. The property sold for £1.37 million, against a guide of £1.1 million. On the same street, Strettons sold a similar building comprising two flats for £820,000 — £95,000 above the guide price.
Strettons’ Andrew Brown says: “Given the unique circumstances we continue to find ourselves in, I am proud of how the team reacted during the first weeks of lockdown to ensure our auction went ahead.”
Allsop made the switch from ballroom to digital at five days’ notice in
March. The system has become mainstream and allowed uninterrupted trade throughout the year.
Other auction houses did the same — and for one or two, the experience was familiar. The Lambert Smith Hampton auctions team has been the online property auction house 574.co.uk for years.
Max Mason of 574 says that 2020 “was a year of lower volumes. However, in terms of regularity of our service, we never stopped. When the pandemic happened, it was business as usual, which is testament to our platform and how it works. We only had one withdrawal of one lot in March when lockdown happened. You see auctioneers talking about their new experience of being online. That’s been entertaining for us. It has been business as usual.”
Savills Auctions calls 2020 “a year of firsts”. It raised £270 million from nine sales, with an average sold price of over £400,000. Like Strettons, Savills put into place a livestreamed auction, in place of
When the pandemic happened, it was business as usual’
its typical ballroom sale. Some auction houses chose to go with a countdown style of auction, with multiple lots being sold at once and viewers able to follow numbers on a screen. Savills introduced a new virtual format allowing bidders to participate remotely while following the action in real time on a livestream, with the auctioneer taking bids at the virtual rostrum as they would in the auction room.
Savills’s first remote sale took place on March 26 and was conducted by a single auctioneer, supported by a team of nearly 30 colleagues working from home. Its auctions replicate the bidding process of the live auction room, with each lot live in turn until the gavel falls.
The success of the livestreamed auction style and demand from vendors meant Savills held more sales than in any previous year, including the firm’s first ever August auction due to client demand.
Christopher Coleman-Smith, head of Savills Auctions, said: “Going into 2020, no one could have foreseen the pandemic’s effect on the industry and the ways in which we would have to adapt. In March we made a choice; we knew that ballroom sales were not an option but chose to give our bidders and vendors the next best thing, a livestreamed sale. In a year of great uncertainty, we swam against the tide of the wider auctions market and have had a comparatively successful year.”
As for what is selling at these auctions, the story this year is residential. Auction House London’s Andrew Binstock says: “What’s interesting is how the residential market has managed to stay buoyant throughout the pandemic. Maybe it’s the stamp duty holiday, maybe because everyone’s at home and scrolling through property websites. Residential property now seems to be a strong asset class. It’s hard to pinpoint why an area or even a property is popular, but we get wonderful surprises in auctions where a lot has 20 people fighting over it.”
At Strettons’ May auction, a mixed retail/residential investment on City Road, London EC1, sold for £1.3 million above its guide. Producing £232,320 per annum, it went for £2.75 million, following competitive bidding which saw the eventual winner increase bids at £100,000 increments. Overall, the sale raised over £8.33 million, with a 92 per cent success rate.
The City Road property, the first lot in the sale, reached the highest price of the day and set the tone. A freehold vacant property comprising three flats, in Hack
Residential property now seems to be a strong asset class’
ney, east London, sold for £1.152 million against a guide of £925,000 plus and a freehold vacant double shop and upper parts in Walthamstow sold for £1.261 million (guide, £1 million).
Among the biggest lots of the year, Allsop sold the freehold of a job centre in Tottenham, let to the Secretary of State until 2028. It made £7 million, showing a net initial yield of 4.75 per cent.
Another big sale in 2020 was BidX1 and Savills retail investment team’s success with Westway Retail Park in Cumbernauld, for a price thought to
be around £7.5 million. Simon Bailey at BidX1 says his firm received a number of competitive bids prior to the auction. The buyer is UK-based, while the underbidders included family offices, PLC property companies and high-networth regional investors.
Like 574, BidX1 was an online auction house before lockdown began. Bailey says: “A property firm that puts technology and data at the heart of its model is now a hugely valuable partner in any sale process. As the mature players in this space, we are seeing a huge increase in demand for a more flexible, modern
and tech-focused approach, both from existing and new corporate clients.”
At Strettons, Brown says it was stamp duty changes that led to a strong July sale, where it raised £11.3 million, with a 90 per cent success rate.
Among residential properties performing well, a freehold vacant house for improvement in Walthamstow sold for £450,000 against a guide of £375,000 plus. In Ilford, Essex, two freehold properties sold for £390,000 and £462,000 respectively, both above guide. The highest price of the July sale was for 39 Darenth Road in Stamford Hill. The
vacant freehold house, on the market for the first time since the Second World War, sold for £1.36 million (guide, £1.1 million to £1.2 million).
Strettons reports commercial sales at its July sale, but they are all non-prime. A freehold mixed commercial and residential investment in Leytonstone, producing £67,000 per annum, went for £830,000 against a guide of £700,000 plus, and a freehold industrial premises in Rainham, Essex, sold for £428,000 (guide, £345,000 plus).
“Vacant secondary retail, from our experience, is very hard to sell,” says Binstock, at Auction House London. “There’s not really any audience for that at all.”
Allsop research show that one of the losers in 2020 was retail tenant demand, with rents in the core city centre high street uncertain at best, and typically falling in all but the most prime locations. It also points to acceptance by the market and pragmatism from landlords that is leading to a more realistic approach to valuation.
One Allsop client sold a long-held office opposite Windsor Castle for £2.625 million, showing a yield of 3.5 per cent. Within a fortnight, he had replaced this income for just £850,000, as he was happy with the risk/reward of a 12.6 per cent yield on a retail asset in Birkenhead, let on a longer lease than his Windsor office.
“When you are trying to sell a commercial investment, it has to be underpinned by a strong covenant,” says Binstock. “Even affluent areas have lots of empty properties on their high street. Your covenant has to be a Costa Coffee or someone who is definitely going to ride this out.”
There are exceptions. One of the best lots in Auction House London’s December catalogue was the 6,000 sq ft 107-109 Ormside Street, Southwark, London SE15. The end-of-terrace brick-built industrial/ workshop unit producing £40,000 a year was underpinned by a tenant that wanted to stay. It sold for £902,000. “It had lots of angles,” says Binstock. “It wasn’t just a dry, commercial investment.”
Jonathan Ross of Barnett Ross says a number of investors have completely changed their strategy on higher-value town centre retail. “They want smaller lot sizes, with rental income in many cases below £20,000,” he says.
“The residential side has been healthier. The lots we attract usually around the London area have seen no shortage of demand, a lot of the time from owner-occupiers. The stamp duty holiday is helping things. However, I think the buy-to-let investor has largely left the market.”
Ross says central London has suffered but London suburbs have seen gains.
Strettons’ September sale was its best since March 2008. Overall it raised £16.5 million and sold 84 per cent of the properties offered on the day. The highest price of the sale was £1.15 million, for a freehold vacant shop, basement and residential investment on Bethnal Green Road, east London. Other notable sales included a freehold vacant office and upper parts with development potential in Clapton, east London, sold for £710,000 against a guide of £450,000 plus, and a freehold vacant shop and flat in Hackney, sold for £620,000 against a guide of £550,000 plus.
At its October sale, Strettons’ top price was £801,000 for a freehold residential investment comprising eight flats and six ground rents on Sutherland Avenue in Maida Vale, London W9. This was followed by a freehold vacant land site with planning permission for a three-bedroom house and a pair of two-bedroom flats on Bakers Avenue, Walthamstow E17, which sold for £601,000.
A plot of freehold vacant land in Iver, Buckinghamshire was the star lot for Strettons in its December sale. The property sold for £1.04 million, nearly £1 million above its £150,000-plus guide.
Brown says: “Lots such as this are why I love auctions and demonstrate why they are the best sales method for properties that are unusual and difficult to value. It is highly unlikely that the site would have achieved this price if it had been sold by private treaty. It would never have been marketed at that price, but in our auction we had several motivated buyers who clearly had costed plans for the site which meant that, after very competitive bidding, it was sold for almost ten times the guide.”
Clive Emson did well with lots far outside London in 2020. It started its online auctions in May and had a series of strong catalogues throughout the latter half of the year, culminating in December, when it sold a characterful former chapel in St Austell, Cornwall, for £203,000 against a guide price of £135,000 plus. The pair of detached former ecclesiastical buildings, both in need of repair, are near St Austell’s town centre. The chapel building also has planning approval to turn the existing space into four onebedroom flats, four maisonettes, a penthouse apartment and a two-bedroom cottage.
A five-storey former flour mill in Gloucestershire with the opportunity for redevelopment went up for sale at a guide price of £100,000 to £125,000, and the hammer came down at £280,000. Each of its five floors had an open-plan design and wooden support beams that captured the imagination of developers, who also liked its planning consent for 17 dwellings.
Allsop Residential’s December sale raised £53 million on 192 lots, with a success rate of 86 per cent. The most popular lot, a maisonette in Haggerston, attracted 140 bids, as buyers rushed to take advantage of the stamp duty holiday before the deadline. The highestvalue lot, a mid-terrace building in West Kensington, sold prior to the auction at £1.75 million.
Richard Adamson, partner and auctioneer at Allsop, says: “Despite all of our auctions but the February one taking place outside of the ballroom in 2020, we’ve seen consistently high levels of
Auctions are the best sales method for unusual properties’
buyer demand, and the success rates of our sales have been extraordinary. The stamp duty tax relief has undoubtedly contributed to the high levels of activity, but there have been other factors at play — at a time of uncertainty, people tend to turn to the familiar, which in this case is property, an asset that many understand well and are comfortable investing in.”
Among lots in BidX1’s December sale was the freehold of the Children’s Society unit on West End Lane, West Hampstead. It is a freehold retail/ground rent investment let on a new ten-year lease renewal, subject to break option, and a three-bedroom maisonette let for 99 years from 1991, at a total rent of £30,100. It went for £498,000.
Among lots in BidX1’s February 2021 sale, it is offering a long-leasehold threebedroom maisonette in Forest Hill, SE23, at a guide price of £485,000.
Ross expects a slow start to 2021. “The first auctions in February will see lighter catalogues, especially on the commercial side,” he predicts. “In the middle of a lockdown, the appetite for something that isn’t at the moment trading has to be diminished. But there is still plenty of demand for smaller, secondary, soletrader tenants, such as local takeaways, convenience stores and nail bars. We know they are going to bounce back as soon as lockdown is over.
“I think things have started to slow down. We will see if prices start adjusting once we are out of lockdown and unemployment increases, which it is bound to do.”
Binstock agrees 2021 is not starting as strongly as 2020 ended. “We had huge amounts in October and September,” he says. “The volume levels tapered off a bit. They are steady for us at around the 120-lot mark. I think there’ll be a strong February and then a breathing period when people see what happens.”
McHugh & Co has a 163-lot sale in February, offering properties all over London and the Home Counties, as well as lots in the North West, East of England and Scotland. They range from goodquality residential property guided at £1 million plus, to a plot of land in Mill Hill guided at £1,000 plus and a lock-up garage in Hampstead, guided at £35,000.
It is another record-beating catalogue for McHugh & Co, after its December 2020 catalogue was its largest ever at 160 lots.
At 574, Mason believes that, as the country comes out of lockdown, many auctioneers will continue with online.
“Our system offers flexibility,” he says. “A good proportion of standard auction clientèle are insolvency practitioners. One of the key reasons they go to auction is because of its speed. When they ask us when our next available auction is, we can say ‘today’. It’s flexibility on when to go to market and also how to go about your marketing... Each property can have its bespoke marketing duration.”
In December, 574 offered an online auction for a former hospital site in Redruth, Cornwall. Mason describes as “a complicated property, though not high value”. Listed at £150,000, it sold for £450,000. He attributes the uplift to the extra time 574 was able to give to marketing. He says “The client, Homes England, produced a thorough legal pack and wanted to sell it before the year end. But we knew that to give people time for due diligence, it needed a longer marketing period of four weeks instead of three.”
As for Strettons, no doubt its 1930s founder Jack Tobin would be relieved to learn that his firm plans a combination of ballroom and online auctions, as we return to what Brown calls “something a bit more like normality”.
When they ask when our next auction is, we can say: “today”’