Estelle Maxwell
Prices achieved at auction for commercial property are likely to deteriorate further this autumn, which will force investment yields upwards, according to Jones Lang LaSalle research.
The report released this week analyses the stock sold in July by the UK’s top three auction houses, JLL, Allsop and Cushman & Wakefield. Their total sales raised £83m after 118 out of 181 buildings were sold.
It found that, despite sustained demand for prime long-lease stock with secure income streams, the negative sentiment surrounding the UK economy is likely to lead to further price corrections as investors find it more costly and difficult to secure funds.
JLL found that average retail yield in July hit 6.47% for commercial properties with 12 years to run on the lease, against a rolling average of 5.68% over April-June as prices fell.
Experienced investors were buying selectively, often preferring to purchase individual properties in locations well known to them rather than buying buildings unseen or as part of a portfolio.
And the research revealed that the difference between retail yields on 40 unsold properties was less pronounced than expected against those that had been sold under the hammer, averaging 6.38%.
“This was surprising,” said Richard Auterac, JLL’s joint head of auctions. “We were anticipating the yields on unsold properties would be significantly less because of pricing issues, but this was not so, although some buildings were clearly overpriced.
“Most importantly it demonstrates that prices still have further to fall, but we have no evidence to show by how much at present.”
