Continued economic uncertainty generated by the Eurozone crisis dampened investor confidence during the latest round of commercial property auctions.
The latest Commercial Property Auction Data Market Flash (cPad) from Acuitus and IPD shows that, while sales volumes were up slightly (+9%), the overall sale rate was down from 75% to 66%.
Commenting on the findings, Acuitus’s Richard Auterac, said: “Overall, the auction market remained broadly flat with activity rising only slightly. Sales rates were down reflecting private investor concerns about the Eurozone crisis. However, the financial storm has a silver lining for the London market where overseas money has been looking for an investment home”.
Retail property still accounts for the majority of sales at auction. However, in the face of softening rents and retailer woes – of which Clinton Cards is the latest graphic example – accurate pricing remains a challenge.
IPD Senior Research Manager, Greg Mansell, commented: “The retail market is heavily influenced by wider economic performance. Investors will need to pay close attention to changes in consumer and retailer sentiment in an effort to gauge occupier demand in what is continuing to be a market driven by income performance rather than rental value growth or capital value growth. Astute investors with good asset management skills may see opportunities where others cannot, so chasing strong returns may be a realistic goal for some”.
While retail continues to dominate the auction room, during the latest round of sales the office sector regained some of its popularity accounting for 23% of the total of stock sold. This was the second consecutive cPad report where the sale rate for offices has been higher than for retail investments.
Generally, auction sale yields remained stable with the average secondary yield standing at 8.4%. The prime and tertiary yield gap contracted from 380 to 290 basis points as the average upper quartile yield hardened to 9.3% from 10%.
However, Richard Auterac believes it would be premature to suggest that this narrowing is due to a market recovery: “It is probably due to stock selection for this particular round of auctions and also the fact that the lots which were perceived as having the highest risk did not find buyersmeet their owner’s valuation aspirations”.
“Having said thisHowever, it should also must be noted that there is good demand right across the property investment spectrum from investors keen to put their cash to work on turning around assets. This which is in stark contrast to the dearth of demand in the last major market upheaval of the early to mid- 1990’s.”
To access the full cPad June 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 )
