Auctions: let’s go shopping for shops

It has been a tough year for the retail sector but investors are still avid buyers of shops at auction. Acuitus chairman Richard Auterac looks at what has been selling and offers advice for those thinking of bidding for a shop investment. Broadway, Cotswolds, Worcestershire Guide price: £1.45m (7.06%) Sold for: £1.79m Net initial yield: 5.7% Seller: High-net-worth property investor Type: Shop and upper parts Income: £108,600 pax ■ Let to Landmark Broadway for 20 years from 2005 ■  Attractive to HNWI looking for a handsome Cotswolds property ■  Sold February 2018 Sherborne, Dorset Guide price: £1.1m (5.67%) Sold for: £1.195m Net initial yield: 5.2% Seller: High-net-worth property investor Type: bank/residential Income: £66,000 pax ■  Let to Lloyds Bank for 10 years from 2011 ■ Attractive to HNWI looking for long-term capital growth ■ Sold March 2018 Salisbury, Wiltshire Guide price: £375,000-£400,000 (6.2%) Sold for: £511,000 Net initial yield: 4.6% Seller: Property investor Type: Retail and residential Income: £25,000 pax ■  Let to One Stop Stores for 20 years from 2018 with tenant’s break in 2028 ■  New lease of corner shop in suburb of affluent city ■  Attractive to private investors looking for long‑term, secure income ■  Sold March 2018 Watford, Hertfordshire Guide price: £475,000 (5.87%) Sold for: £508,000 Net initial yield: 5.4% Seller: Major investment fund Type: Shop and residential Income: £29,180 pax ■  Let to a baker’s shop for 10 years from 2016 ■  Residential AST above ■  Suburban London commuter town ■  Attractive to HNWI for rental and capital growth ■  Sold March 2018 Henley-on-Thames, Oxfordshire Guide price: £525,000-£550,000 (6.4%) Sold for: £605,000 Net initial yield: 5.6% Seller: High-net-worth property investor Type: Shop and residential Income: £36,000 pax ■  Let to charity for 10 years from 2016 with tenant’s break in 2021 ■ Affluent Thames Valley town ■  Attractive to HNWI for capital value growth ■  Sold March 2018 ‘Some tips if you’re thinking of buying a shop…’ Richard Auterac, chairman, Acuitus Unless you are an experienced property investor, buy in a location you know well. As a consumer yourself, you will have a good sense of whether the property and occupier are right. Is the property in the prime town centre trading pitch or on the fringe? Is it one of the better shops in the town? Does its layout mean it could be easily adapted for other retail uses? Does it feel like the retail offer can generate sufficient revenue to pay the rent? Visit the shop, see if it’s trading well. Does the business feel good? Does the offer feel aligned to the local population/demographic profile? What level of vacancy is there in the surrounding area? When was the current rent agreed? Recent lettings are likely to reflect more sustainable rents as they have been agreed in today’s economic environment. Be aware that even if the current rent is above the prevailing one, the shop may still be a sound investment if the tenant is substantial enough – for example, a nationwide retailer – to carry on paying the rent until expiry of the lease. Is there an angle to improve or repurpose the property? Bringing underutilised space into a new use (for example, converting upper floors above shops into residential) has driven significant value enhancement particularly in London and the South East.