The latest cPad (Commercial Property Auction Data) Market Flash from Acuitus and IPD shows that both sales volumes (+43%) and the overall sale rate (75%) increased in the latest round of commercial property auctions.
Retail yields hardened to 6.2% while the average property yield across all sales in the auction room was also sharper at 8.5%. The gap between prime and high yield properties has continued to open and is now at its widest for more than a decade.
Acuitus’s Richard Auterac comments: “Investors remain assiduous in their requirements and are now focusing on sustainable market rent in addition to lease length and tenant covenant strength. However, with volume in the auction room and more pricing evidence as a consequence, we remain cautiously optimistic that the market will move forward with more purpose as the year progresses”.
Retail is still the dominant property sector accounting for 64% of properties sold in the latest auctions, but the research shows there has been a large increase in the office sector which accounted for 22%.This is the highest proportion on record. Encouragingly the sale rate for offices was equally high achieving 95% which is again the highest recorded.
From a geographical perspective, there has been a significant increase in transactions involving properties outside London. The proportion of non-London properties selling since December rose by 65% and accounted for 85% of all properties sold.
IPD analysis of the results indicates that there has been a small improvement in confidence for better quality investments as the average initial yield hardened to 8.5% from 9.1%. The growing number of buyers for secondary assets is encouraging as their sale is generating pricing evidence and this could stimulate the release of further assets onto the market.
Greg Mansell of IPD comments: “Arguably better quality stock may now need to include a new criterion – sustainable market rent – to add to length of unexpired lease and strength of the tenant’s financial standing.
“A new letting in today’s market is clearly more desirable to investors than an existing rent that was agreed five years ago. Of particular concern to an investor in buying existing leases is not only trying to estimate the level of over-rentedness but also to judge how long the tenant can continue paying a rent that might be double the current market rent.”
To access the full cPad April 2012 Market Flash please click here
For further infomation, please contact:
Richard Auterac Acuitus +44 (0)20 7034 4851 (richard.auterac@acuitus.co.uk)
Greg Mansell IPD +44 (0)20 7336 9384 (greg.mansell@ipd.com)
