Retail investments made up 78% of sales at Allsop’s October commercial auction last week, but the prices paid by investors showed marked differences.
A total of 98 of the 126 lots sold at the 23 October sale were shops or retail-led mixed-use developments, and the yields achieved varied from 3.1% to more than 15%.
A parade of five shops on Union Street, Torquay, comprising 20,572 sq ft, let to tenants including Vodafone and Holland & Barrett and generating an annual income of £170,000 sold for £1.2m, reflecting a yield of 14.2%.
Allsop said that the property had been sold at such a high yield because it was let on very short leases, reflecting a significant income risk.
By contrast, a 2,450 sq ft shop on King Street in Hammersmith, W6, let to ice cream parlour Creams with an annual income of £70,000 sold for £1.59m, reflecting a yield of 4.4%, as bidders vied to buy the property which is located 300m from Hammersmith Underground station.
“The spread of yields in the retail sector has become ever wider,” said George Walker, partner and auctioneer at Allsop.
“For some of the weaker towns, the income risk is much greater and buyers are seeking a more significant risk premium. [Elsewhere], buyers have greater faith in the longevity of the income, and rents are not perceived to be too high and might show some early growth.”
Overall, Allsop sold 126 of the 178 lots offered at its October commercial sale, achieving a success rate of 71% and raising £71.5m.
In total, 21 investments sold at £1m or more, with lots in London and the South East attracting the most competitive bidding.
The highest price achieved was for a 54,225 sq ft shop in Gravesend, Kent (pictured), let to B&M for an annual rent of £200,000 on a lease that runs until 2031 with no breaks, which sold for £2.85m, reflecting a 7% yield.
“There is clearly plenty of cash among willing investors, but these buyers have a wide choice of stock to look at, some of which has been languishing on the market for some time,” Walker added.
Allsop’s next commercial sale will be held on 9 December at the Berkeley, Knightsbridge, SW1.
