July auction raises £55.7m as investors back property

8th July 2016

Despite uncertainty in the wider economy, the latest Acuitus auction exceeded expectations and raised £55.7m as investors targeted a wide range of commercial property.

A total of 73 lots sold – 83% of those offered in the sale – with 20 achieving prices of more than £1m.

Acuitus auctioneer, Richard Auterac, commented: “In this time of economic uncertainty, the auction room enables investors to access the type of income returns which are not available through other investment media and that demand was vividly illustrated today.

“The mood of investors in the room was more upbeat than it was in our May auction.”

The highest price achieved in the room was for a 13,986-sq ft Aldi supermarket investment in Rochdale. Let until 2030 at a current rent of £226,281, it sold for £3.7m at a yield of 5.7%.

Buyers were also in the market for properties with asset management or development opportunities. A vacant 3,814 freehold office building with residential redevelopment potential in Grange Road near Tower Bridge, London SE1 sold for £1.35m – 60% above its guide price.

Bank investments were popular at the sale.  A 8,711 sq ft Royal Bank of Scotland in Park Row, Leeds let until 2026 at a current rent of £165,001pax sold for £2.35m at a yield of 7.4%.

There was also strong demand for a modern industrial investment with a two-unit property in Trafford Park, Manchester which was being offered by an institutional investor. It sold for £1.59m at yield of 7.4%.

Richard Auterac comments: “The halt on redemptions from the large scale open-ended property funds has been widely publicised this week but this auction was an insight into what is happening in the heart of the private investor UK commercial property market where ownership of ‘bricks & mortar’ is less prone to short-term instability.

 

“Confronted by negative returns from government bonds and continued volatility in the equities market both private investors and entrepreneurial property companies are continuing to target commercial property.”

A post-referendum survey carried out by Acuitus ahead of the July auction which canvassed  50 UK clearing banks, international banks, development lenders and providers of short-term finance indicated that there has been little or no change to lending terms.

Richard Auterac comments: “With regard to the commercial property investment market, the clear message from the UK clearing banks and specialist investment lenders is that they are open for business as usual.

“The prudent level of debt finance available to investors was clearly an important factor in the strong level of buyer demand at this auction. There is a long way to go with the negotiation of the UK’s exit from the European Union but this sale demonstrated that despite the headlines around the large investment funds, there is  strong investor demand at the grassroots level.”

Other lots sold in the auction included:

  • 10 Church Street Peterborough: a freehold bank investment let to Clydesdale Bank on a new 10-year lease renewal with tenant breaks in 2019 and 2021 sold for £960,000 at a yield of 5.9%
  • 56-62 Bridge Place Worksop: a freehold retail investment let to B&M Retail until 2024 at a current rent of £150,000pax sold for £1.651m at a yield of 8.5%
  • 252 High Road, Loughton, Essex: three ground floor retail units producing current income of £99,950pax sold for £1.25m at a yield of 7.5%
  • 19-20 Market Place, Boston, Lincs: a freehold retail investment let to Superdrug until 2022 at a rent of £65,000pax sold for £725,000 at a yield of 8.5%.

The fifth Acuitus auction of 2016 will take place on October 13th at the Radisson Blu Portman Hotel, 22 Portman Square, London W1.