We secured an 80% sale rate raising a total of £40 million, a positive start to the year. This is up almost 50% on levels achieved a year ago and continues the strong resurgence in the market which started during the middle of 2009. The average price achieved across all properties was £1.05 million, with the largest lot of the day, a Tesco store in St Albans, selling in the region of £5 million. The lowest yield of the day was 4.06% for an industrial ground rent on Middlefield Industrial Estate in Sandy, Bedfordshire, while the average yield for the whole auction was 6.24%.
Commenting on the auction’s result, Richard Auterac, Director and Auctioneer at Jones Lang LaSalle, said: “This is a fantastic result and we are particularly pleased with how much was raised for our clients. There was real competitive bidding in the room with several lots selling for significantly above guide prices. The auction room witnessed a bounce-back at the end of 2009 and these results confirm the considerable depth of cash seeking property investments from discerning investors. This auction will also set a benchmark for the coming year with 20% of available properties achieving yields of 4%, a result I would have been incredulous about six months ago. Buyers are however still more abundant than sellers but with sentiment and confidence strengthening we should expect an increased flow of prime stock into the auction room during 2010.”
Held at the Millennium Hotel in London’s West End, attendance at the auction was once again extremely high with an exceptionally wide spread of private investors present. Notable sales included:
Looking forward The UK’s fiscal debt mountain will be the major concern for this year but if this is reduced too soon and too quickly it could jeopardise the fledgling recovery. Encouragingly, the service sector in the UK grew at its fastest monthly pace in three years in February pointing to further signs of the economy’s recovery.
Retail sales rebounded in February after a disappointing January as figures from the British Retail Consortium (BRC) showed like-for-like sales increased by 2.2%. This is a considerable turnaround compared to the -0.7% fall a month earlier as sales were hit by the bad weather. Consumer spending, however, is expected to remain muted this year as households are still faced with a weak job market, low wage growth, high debt levels and the VAT increase from January. The Jones Lang LaSalle forecasts suggest that all property total returns will reach 14.5% in 2010 driven by falling yields. This year is expected to deliver the strongest returns over the next five years. Average yields are projected to stabilise over 2011 before starting to rise from 2012 as pricing adjusts to the higher risk-free rate.
Investment demand will be driven by Retail funds, REITs, and overseas investors. Given this strength of demand we expect yields to remain under downward pressure over the first half of 2010 although there will still be weak demand for the poorer secondary assets. Whilst buyers remain abundant, supply of good quality product is limited. That said with sentiment and confidence strengthening we expect an increased flow of prime stock into the auction room during 2010.