The volume of commercial property assets up for sale during the autumn round of auctions was up in comparison with the summer sales but yields continued to move out as the market remains divided on pricing.
These are the main findings of the latest cPad (Commercial Property Auction Data) Market Flash from Acuitus and IPD which charts activity in the sector.
Acuitus’s Richard Auterac commented: “The higher – and more internationalised – level of investor interest is coinciding with a greater supply of assets for sale. The volume of properties coming to auction during the autumn sales was up by around 15% on the corresponding level at the summer auctions.
“Also of encouragement to buyers is that several new lenders entered the market during the third quarter of the year. They are providing both an alternative source of finance and offering commercial loans with much lower stress rates. These new lenders will often look at a borrower’s overall income position. This is enabling higher loan-to-value ratios to be achieved – sometimes as high as 75%.
“However, although improved liquidity and increased supply of assets is positive news, accurately predicting the prices of assets remains problematic. This is mostly due to macro economic factors – primarily the extreme difficulties in the financial markets and the volatility in equity prices.”
The latest cPad report shows that yields continued to weaken in the autumn with the cPad average all-property yield rising 40 basis points to 8.4% since the summer round of auctions. The retail yield rose 30bp to 8.2%, the office yield rose 90bp to 10.6% while the industrial yield showed the greatest increase as it rose by 260bp to 10.6%. The prime (lower quartile) and secondary (upper quartile) yields are at 6.7% and 9.6% respectively.
The demand for London investments has produced a two-tier market between the UK capital and the rest of the country with a 180-point yield gap.
Greg Mansell of IPD commented: “Political posturing has exacerbated investors’ doubts over a timely and adequate resolution to the current European debt crisis. Uncertainty surrounding the political phase of the crisis has manifested itself as declining economic indicators; whether this will translate into a future decline in output has yet to be seen. At the present point in this property cycle, prime properties and properties in prime locations have remained resilient to wider economic problems, whereas secondary properties have suffered.
“Pressure will be on investors to assess if the defensive characteristics of prime property and property in London are enough to justify further price increases. The EIG auction data already shows that both buyers and sellers in this forum have been prompt at re-pricing additional risk and weaker growth prospects, even for prime property.”
To access the full cPad November 2011 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)
