With the imminent General Election creating more political and economic uncertainty, added to by the bungling of the Tory election manifesto and the seeming resurgence of Jeremy Corbyn and the Labour Party, one would have been excused for thinking that the auction market might have been adversely affected, writes John Townsend, consultant at Harold Benjamin Solicitors.
But not a bit of it, with ever eager investors continuing to chase the better quality investments and further signs of residential investors switching to commercial.
The two main commercial auction houses were back in action on the 16 and 19 May and raised a total of £130.3m between them from the sale of 170 properties out of 241 offered, with an average success rate overall of 71%.
However, this was a 20% reduction in total sales from May 2016, with 56 fewer properties sold, which highlights the current difficulty auctioneers are having to secure willing vendors to part with their investment stock at a realistic reserve when it is so difficult to replace it with anything worthy of consideration at a sensible price.
Allsop on the day raised £93.3m at its May sale, with a 71% success rate, compared with the £109.1m it raised on the day in May last year, which increased to £119.4m with post-sale activity, giving a final success rate of 87%.
Acuitus, on the other hand, raised £37m at its May sale this year compared with £67.7m raised in May last year – a 71% success rate versus 84% last year.
Allsop sold 25 lots under the hammer with a lot size in excess of £1m, with six of them over £2m and two over £3m. A further six lots were sold prior with guide prices in excess of £1m.
The two over £3m were Lot 98 in Market Place, Basingstoke, a freehold bank building let to Barclays on a lease to 2026 without break at a rent of £200,000 pa. It sold for £3.34m – a gross return of 5.8% – off a guide price of £3.1m. The other was Lot 100 in Bath Road, Melksham, a freehold supermarket let to Waitrose, with a guarantee from Somerfield Stores for a further 25 years without break at a rent of £235,000 pa. It sold for £3.25m – a gross return of 7.2% – off a guide of £3.25m-plus, a very nice buy.
But it was the very first lot of the morning which commanded the most interest in view of its lot size. Located in Shepherdswell in Kent, just south-east of Canterbury, it was a freehold supermarket let to Co-operative Group Food until 2070 without break at a rent of £7,500 pa. It sold for £238,000 – a gross return of 3.1% – off a guide price of £120,000-£130,000.
The first lot in the afternoon was a leasehold investment in Earls Court Road, SW5, with just over 94 years unexpired but with two flats sold off. Producing a net rent of £67,588 pa, it sold for £1,050,000 – a gross return of 6.4% – off a guide of £900,000-£950,000.
Acuitus sold nine lots in excess of £1m, the largest being Lot 20, a freehold retail and car park investment in Portland Walk Shopping Centre, Barrow-in-Furness. Let at a total rent of £495,000 pa to tenants including Debenhams, Body Shop and WH Smith, it sold for £3m – a gross return of 16.5% – off a guide of £3.25m-£3.5m – another very nice buy.
At the other end of the scale, Acuitus’ first lot was a freehold bank in New Milton, Hampshire, let to Lloyds until 2022 at a rent of £23,500 pa. It sold for £412,000 – a gross return of 5.7% – off a guide of £400,000.
Lot 4 in High Street, Reigate, a freehold restaurant and residential investment, generated heated bidding. Let to Carluccios until 2022 at a rent of £57,500 pa, it sold for £1.3m – a gross return of 4.4% – off a guide of £1.1m.
The real litmus test of the market will be the July sales which follow the General Election, although I suspect that, providing the auctioneers can attract some keenly priced investments, there will be little change to investors’ appetites.
