Allsop Commercial has sold £323.5m of stock at auction so far this year, up by more than £10m on its five-year average.
The UK’s largest commercial auctioneer, with a 64% market share, said the digitisation forced on the market last year had led to “valuable lessons” being learnt about how to handle high volumes of stock more efficiently.
The volume of assets sold rose by 27% to 451 year-on-year. Head of commercial auctions, George Walker, said the team was now operating a two-and-a-half week sale process, from the catalogue going out via e-mail to contracts being exchanged. “The legal pack and due diligence are all ready on day one. Our buyers really anticipate the e-mail,” he said. This compares to a three-and-a-half to four-week timeframe before the pandemic.
“The onus is on the lawyers to get everything ready. We’ve got the technology to get it out quickly and we’ve got the audience,” Walker said.
Allsop said demand was strong across all sectors, with new entrants investing locally for the first time being pitted against cash-rich, deal-driven buyers who are looking to grow their portfolios further away from home. Just over a quarter of buyers so far this year have been new entrants to the market.
Highlights have included the sale of £15m of shopping centres, demonstrating that the market is prepared to compete for these assets.
Another feature has been strong demand for lots with RPI-linked rental increases in response to rising inflation. Convenience stores have been the most common example of this. However, a children’s nursery in Bolton was an early indicator of the demand for indexation. The Busy Bees nursery is let until 2039 with an usually high cap to the RPI increase of 7.5%.
It saw huge competition, despite the passing rent being significantly ahead of market rent, and eventually sold at a net yield of 5.5%, more than 60% ahead of its most recent valuation. This transaction was “perhaps more of a financial hedge than a real estate purchase”, Allsop said.
The commercial sector has also felt the benefit of the strong residential market, driving demand for mixed-use lots and high street shops with upper floors which have yet to be converted. Allsop analysed the 30 most popular lots sold by both numbers of registered bidders and bids placed. It found that half of the top 30 had commercial ground floors and under-utilised ancillary upper parts. These examples were largely drawn from two portfolio sales, let to either Boots or Santander and on leases with three to nine years unexpired. These sales amounted to £66m in total from the sale of 137 lots.
Walker said discussions were ongoing about a return to in-room sales in 2022. “The objective is to allow people to bid in the room but also on a multichannel basis,” he said.
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