The latest Acuitus/IPD cPad Commercial
Property Auction Market Flash shows that the round of auctions in
December experienced a much stronger buying environment than
December saw the greatest level of buyer demand in 2012 with
success rates peaking at 81% up from 77% in Q3. Post-auction sales
have pushed sale rates towards the 90% mark which suggests a depth
of demand more consistent with normal market conditions.
With the current yield gap between prime and secondary at its
widest in 15 years and a dramatic re-basing of retail and office
rents outside London, investors are taking a slightly more positive
view on the risks attached to buying secondary property.
The cPad average yield for all commercial property selling at
auction hardened 40 basis points from October 2012 and now stands
The current gap between the prime yield of 6.9% and secondary
yield of 11.2% is 430 basis points compared with a gap of 510 basis
points last October. The average yield for investments let on
leases with less than five years to expiry continues to move out
and stands 40 basis points higher at 11.4% whilst the yield for
6-15 years' unexpired is 8.1% and has hardened 20 basis points.
Acuitus auctioneer, Richard Auterac, comments: "The market is
still fragile and successful transactions are property-specific
with careful attention being paid to pricing. It is likely that
2013 will see greater activity because sellers and their lenders
will have more evidence to determine their pricing expectations,
adjust to market levels, liquidate their assets and recycle their
"Similarly, an increasing number of buyers will feel that the
bottom of the economic and financial cycle has been reached and
that property priced at this stage should produce long-term capital
Retail property dominates the asset types that sell at auction
and the latest cPad charts how they have fared during the year.
IPD's Greg Mansell comments: "In the early part of 2012, London
shops saw values slip but the second half of the year saw a return
to growth and values were up 0.3% y/y, as at November 2012.
"Conversely, shops outside of the Capital continued to
haemorrhage value and stood 8.4% lower in November compared to the
12 months prior - although the rate of decline has decelerated in
"Most investors are likely to hold off until consumers sustain
spending and retailers commit to consistent rental growth, which
may first require sharp write-downs in the near term.
"However, based on the activity in the auction room and much
improved sales rates for high-yielding regional stock, many
investors are already acting on the early signals and deciding that
at today's yield and rental levels, the long-term returns will
compensate for the risks."
To access the full cPad January 2013 Market
Flash please click here