For a nanosecond I was tempted to agree with a commentator who suggested the auction market was “cooling off” when the first lot at Allsop’s February sale didn’t sell under the hammer.
What with the collapse of world stock markets, talks of Brexit, plummeting oil prices and the uncertainty over interest rates on both sides of the Atlantic, it is understandable that investors might feel a tad cautious about committing their own equity and cash into commercial real estate.
But between the two bellwether firms – Allsop and Acuitus – a combined total of 178 properties out of 210 offered were sold in hours, realising £120m and an overall 85% success rate. This indicates the appetite for commercial investment in the UK is sharpening for correctly priced stock.
As a mirror of wider market sentiment, these were the biggest February sales for some time, easily doubling the results from the opening auctions of 2014 and 2015. Indeed, it was nine years ago when Allsop last raised so much from a February sale.
At Acuitus, where prices averaged £817,000, the 98% success rate reflected how in tune with pricing auction firms can be. The result was also bolstered by the heavy presence of one of the most hotly contested type of stock at auction: receiverships. Almost two-thirds of its catalogue (45 lots) were instructions from receivers, requiring active asset management to unlock value. But with rents rebased and signs of consumer spending increasing, property companies and experienced investors with equity are sourcing such opportunities with gusto.
There are fewer receivership lots generally in the market this month, but nonetheless 69 receiverships were offered between the two major commercial auction houses. The main receivers across both sales were the team from my old firm, CBRE, which offered 32 properties, evenly divided between Allsop and Acuitus.
Of these, Ruislip Manor, in North West London, yielded the biggest price and the most excitement at the Allsop auction, selling for £7.2m from a guide of £4m. Looking ahead, the intense interest for this unbroken parade with development potential next to Ruislip Manor Underground station demonstrates the enormous pent-up demand for prime future development situations, especially within Greater London.
Outside London, a similar situation occurred at the Acuitus sale. A freehold vacant office building in Peterborough was offered on behalf of receivers and sold for £1.3m from a guide of £500,000. The 10,256 sq ft property had planning consent for 24 one-bedroom flats.
One property of note in the Acuitus sale that I thought was a great buy was a most attractive looking retail and residential investment in Stratford-upon-Avon, again offered by CBRE’s receivers. The ground and part first-floor shop was let to Robert Dyas Holdings until 2019 at £100,000 pa with upper parts comprising a vacant five-bed maisonette with planning for four flats. The property sold at the guide price of £1.3m, yielding a very attractive 7.5% on just the shop alone.
It was also good to see both houses giving their young aspiring auctioneers a second chance to show their skills. Will Clough at Allsop this time offered 10 lots, selling eight of them for a total of £2.6m, whereas Jo Seth-Smith at Acuitus sold all five of her lots for £2.3m.
All in all, buying sentiment remains as strong as ever. With many seasoned investors now having to compete with new entrants to the market who favour the stability of property over equity and other investment markets, the auction room may become even more of a hotbed of activity. The demand is certainly there.
The biggest challenge now for both houses is to accumulate a similarly sized quality catalogue for their next round of auctions in March. With fewer sale and leasebacks coming to the room, buyers are looking for asset sweating opportunities, converting former public houses on standalone sites with car park access into convenience stores, or transforming redundant office blocks into flats and student accommodation.
In times of uncertainty we tend to hold fast to what we know, or evolve and adapt to the new environment. It is unsurprising then that in the microcosm of the auction room and the macrocosm of the global stage, the competition for safety, and the search for new opportunities, is intensifying.
John Townsend, consultant, Harold Benjamin
