Investors were undeterred by the latest interest rate rise as the Acuitus commercial property auction on 3 November raised £20.7m, with the sale of 95% of lots offered on the day.
The standout lot was a substantial prime retail parade in Newcastle’s city centre which sold for £4.9m. The Grade II listed property at 139-153 Grainger Street is next to Eldon Square shopping centre and currently produces annual rental income of £560,225. Occupiers in the 22,344-sq ft property include Urban Outfitters, Yo Sushi and Dr Martens.
Charlie Powter, of Acuitus, said: “This demonstrates the continued appetite of investors for properties of scale which are well-located and offer asset management opportunities. These institutional-quality properties are now in the reach of equity-backed investors.”
Elsewhere in the sale, a substantial high street retail asset at 73-74A Broad Street in Reading sold for £1.7m – a net initial yield of 7.8%. The property comprises two retail units which produce a combined rental income of £141,000, with the majority of the income secured by KFC on a lease until 2037 with a tenant break in 2032.
In London, a 1,466 sq ft medical centre at 98 Crawford Street, W1, sold for £1.1m to an overseas investor. The ground and lower-ground property is let to Charterhouse Clinics on a lease running until 2037 at a current rent of £60,000. The sale price reflected a net initial yield equating to 5.1%.
The demand for healthcare investments was further underlined by the sale of two dental surgeries in Worcester and Runcorn, which sold for £387,500 and £327,000 respectively.
Jon Skerry, of Acuitus, said: “Even though the leases on both these assets have tenant break options in 2024, their sale – at yields of 7.3% and 7.9% – reflects the confidence that investors have in the sustained strength of healthcare-related assets.”
Former commercial properties which now offer residential development opportunities also remain in demand. A vacant 6,474 sq ft office building with 33 parking spaces opposite Fareham Railway Station in Hampshire sold for £725,000.
David Margolis, of Acuitus, said: “Given its location opposite the station and its substantial site area, this property was not only of interest to owner occupiers but also to property companies looking to a change of use for residential redevelopment. There is concerted demand for this size of in-town site.”
In Scotland, two buildings on Westpoint Business Park in Aberdeen also found buyers. The 15,394 sq ft 4 Westpoint currently produces annual rental income of £238,607 on a lease expiring in 2029 with a tenant break in 18 months. The lot also included a vacant car park. It achieved £1.125m, while the vacant 43,128-sq ft 1 Westpoint sold for £500,000.
While last week’s interest rate rise was anticipated, Acuitus chairman Richard Auterac believes the sale was further evidence of the strength of the auction sector and its ability to meet the needs of both buyers and sellers at times of economic uncertainty.
He said: “Our analysis of commercial property auction sales through Q3 and into the November sales indicates a hardening of yields for income-producing properties which, in part, can be attributed to the majority of properties having lower rebased rents.
“Although the increases in interest rates will make finance more expensive, they will have less of an impact on investors who are acquiring assets at auction without the immediate need for debt.
“For investment funds, REITs and insolvency practitioners who are looking to liquidate assets in a timely manner, the large pool of new ‘cash-rich’ private equity investors who are buying through Acuitus auctions are an attractive target for asset disposal strategies.”
Acuitus’ next auction will take place on 15 December, with online, phone and proxy bidding.
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