Published by Estates Gazette 04.09.25
Property investment markets progress through distinct phases which are defined by ‘tipping points’ of sentiment where a range of factors lead to shaping new perceptions of pricing.
In this respect, what happens in the commercial property auction market is an important advance indicator of forthcoming step changes in the wider market. Auctions show real investors making real decisions in real time. Being able to interpret the data from sales and apply it to the wider market is a very useful tool to those who have to rely upon historic data and transactions.
As we head into the final quarter of the year, our most recent auction has provided some signs that we may be entering a new phase. Our July auction saw an average of four parties actively competing on each lot with assets achieving around 8% more than their price expectation. And of course, the level of those actually bidding was substantially surpassed by the number of interested parties assessing each lot. Our experience across several decades suggests that this energy of demand is significant.
These indicators are a move to a healthy, fully functioning auction environment, and can give confidence to sellers to bring their assets to market. We still need a stronger flow of better quality lots as there is certainly more demand than supply at present.
The finance landscape remains pivotal and while the latest interest rate cut was helpful, given that it was a committee ‘split decision’ and with the current trajectory of inflation, we are unlikely to see another reduction before the year-end. That is not to say that there is not a substantial pool of commercial property finance available. During the summer, some lenders were offering rate discounts to stimulate activity. Indeed, most finance providers are well behind their annual business targets for lending this year.
A positive movement in asset valuations has historically been the key to prompting a new environment in which enhanced supply can meet willing demand supported by available finance.
However, valuers remain understandably cautious not least against a backdrop of economic uncertainty and geopolitical unrest. But in this respect, during the final months of this year, we believe auction sales can provide further pricing evidence for progressive valuations.
The era of online auctions, which has enabled more sales to take place each year, has effectively removed the cumulative effect of making the year-end such a signal moment for our sector. But for many investors, and especially those facing the refinancing process for their assets, it can be a time to unwind existing situations and move forward with new investment strategies.
We calculate that, despite all the challenges that have been thrown at it, 2025 commercial property auction sale volumes are on track to reach those of last year which, in turn, were the highest we have seen since 2017. In the context of 2025 so far, both domestically UK and internationally, the extent to which demand has been translated into transactions through our auctions has been rather remarkable.
There is, of course, some way to go and we still can find ourselves in a world of ‘one step forward, two steps back’. For example, there is gently growing confidence in some areas of the retail property market – so long a stalwart of auction sales – but the recent news about widespread redundancies and closures in the hospitality and leisure sectors must also be taken into account.
Perhaps not surprisingly, faced with these sector-specific challenges, investors are increasingly keen on mixed-use assets which spread the risk load. Lenders are aligned with this thinking and are increasingly providing enhanced finance terms for mixed-use assets.
So, while our sector still faces some headwinds (the October UK government budget may be another ‘speed bump’ along the way!), there are now reasons to believe that a ‘tipping point’ is being approached. This could usher in new dynamics to resolve both the current problems and future aspirations of all those involved in our market.
