If sceptics needed a litmus test to show that confidence in commercial property investment at auction is as robust as ever, the latest Allsop and Acuitus sales provided it.
Allsop had its biggest commercial auction result for a May sale in 10 years, posting £109.1m from 161 sold properties, with a success rate of 79% and an average lot size of around £677,500.
Acuitus, with its sale three days later, has now posted £56.1m from the sale of 69 lots, with a 75% success rate and an average lot size of around £806,000.
The biggest lot sold by Allsop in the room was Ye Olde King & Queen pub in Brighton, which sold for £4.1m off a guide of £4m-plus. Let to Spirit Pub Company (Trent) with a guarantee at a rent of £307,971 pa until 2034, rising to a minimum of £366,084 in 2023, this attractive and historic freehold investment showed an attractive initial gross return of 7.48%.
Four lots later, the Cineworld multiplex cinema in Southampton sold prior to auction at a price believed to be in excess of the £5m guide. This long leasehold leisure investment is well located in a mixed-use marina development and is let with a guarantee until 2027 at a rent of £485,903 pa, with a fixed uplift in 2022.
Acuitus fared well with Waterside Marina in Brightlingsea, Essex. Guided at £5m-plus, this freehold investment sold under the hammer for £6.6m, a gross return of 7.32%, but with parts of it still unoccupied and plenty of angles to exploit.
Between them, Allsop and Acuitus took on 10 £3m-plus lots. While the bread and butter of auctions are lots under £1m, auctioneers must push the boundaries to compete with private treaty agents selling properties that should be offered in the room; I commend them for taking on these larger lots.
A closer look at the results shows that, while both auction houses succeeded in selling a healthy number of properties with a capital value of more than £1m, quite a few over that bracket also failed to sell on the day.
Allsop offered 36 lots priced at more than £1m, selling 27 of them in locations where you can imagine demand being strong, such as Lymington in Hampshire, Richmond in Surrey, York, and Chelsea, SW3.
This compared with some towns in the North East, where demand might not be so keen. Investors are clearly seeking security in the run up to the 23 June referendum.
At Acuitus, 11 lots were sold at more than £1m, but 12 others failed to sell, of which six were priced above £2m. Successful lots were in locations including Canterbury in Kent, Lincoln, and Highgate, N6.
The locations they failed to sell in at over £1m were Livingston in Scotland, Bradford and Huddersfield in Yorkshire, Sale in Greater Manchester, Halesowen in the West Midlands, and Liverpool.
The two lots that didn’t sell, despite their locations, were in Salisbury, Hampshire, and Hackney, E8.
Salisbury was a freehold bank investment let to Lloyds Bank until 2021 at £230,000 pa, and the last bid was at £3.34m, which would have been a gross return of 6.88%. It is probably not a branch you would want vacant in five years’ time, although the bank chose not to exercise its break this year.
Hackney was a freehold retail and residential investment let to a local covenant until 2023 at £22,000 pa on an overriding lease of nearly the whole building, which included two floors of residential. A separate ground-floor shop produced a further £6,000 pa. With a total of £28,000 pa, the last bid was £1.19m, so a great deal was clearly riding on obtaining possession of the residential floors in eight years.
Separately, one investment that I thought showed particularly good value was lot 73 in the Acuitus sale in Galashiels, Selkirkshire. A modern heritable retail investment, built about 14 years ago and comprising a double shop unit of just over 4,500 sq ft, it was let to Bonmarché until 2018 at £45,000 pa. Guided at just £250,000 – a gross yield of 18%– it sold prior at just over this level.
All in all, the mood in both rooms was positive and a number of investors appear to be moving their funds away from residential buy-to-lets.
I await with interest the July tranche of auctions. Post-referendum, what will we see? Plus c’est change, plus c’est la meme chose, or volatility? It makes for potentially challenging times ahead.
John Townsend is a consultant at Harold Benjamin Solicitors
