Viewpoint by Richard Auterac originally published by Green Street News 07.10.26
What auctions tell us about the state of the secondary office market
During the past decade, driven by increasing obsolescence and, more recently, by upcoming EPC requirements, there has been a growing stream of secondary office buildings coming to market.
For many owners, auctions have become the preferred way to sell office assets that are partially let or wholly vacant. Given the widely ranging views on the future of the office sector, it’s a fast and effective sale environment in which to crystallise true price levels and return capital.So, to better understand the current trajectory of vacant and secondary offices, we analysed the 384 office assets that Acuitus has sold over the past 10 years to see how pricing has moved across vacant and partially-let assets.
The government’s introduction of Permitted Development Rights in 2013 triggered the first wave of office repurposing, a trend accelerated by the pandemic and the rise of working from home. Sales of vacant office properties peaked in 2023-24, but more recently the number of sales of income-producing assets has outstripped those that are empty. The contrast in prices achieved over that 10-year period is stark: our analysis indicates that average sale prices per sq ft for income-producing properties have fallen by around 19%, while for vacant stock the fall has been around 33%.
To some extent, this reflects the growing presence in the market of well-capitalised investors who believe reports of the ‘death of the office’ have been exaggerated, and who are acquiring income-producing assets at prices they expect will look cheap in hindsight.
By contrast, the sale of vacant office buildings is being driven primarily by the potential for conversion to another use. In this context, the sale of a substantial lot in our last auction was an interesting indicator of where values stand for empty offices.
The Glanty is a multi-building office complex in Staines which was first developed in the noughties, and now is where vacant buildings on the site are already being considered for repositioning to residential use. At our September auction, we sold a 68,554 sq ft office at the scheme with parking for 293 cars. The sale price was £3.08m, reflecting a capital value of around £45/sq ft – headroom that could help fund the purchaser’s repositioning costs.
As ever, location remains critical for empty buildings seeking a new use. In September 2023, we sold 1 The Square, a 37,664 sq ft freehold office building at Stockley Park, Hayes with parking for 160 cars on a 2.2-acre site. The sale reflected a capital value of around £75/sq ft which was the market rate at the time. However, while both that building and The Glanty are close to Heathrow, the Stockley Park property was ready for re-occupation and is acknowledged to be on one of the best business park locations. The lower capital value for the Staines property could also be due to the impact on prices of the rising costs of construction.
The recent fall in vacant-property pricing also reflects looming EPC regulation, which by 2030 will compel landlords to bring their buildings up to a specified standard. Faced with this, many owners are shedding assets rather than take on the capital expenditure compliance would require.
Although also subject to EPC compliance, sentiment towards let and partially let offices is different. Yields on let stock sold in the first half of this year sat within the same broad range as across the wider analysis period: over the past 10 years, when vacant-possession lots are excluded, achieved yields on income-producing stock have remained within a steady albeit wide 9-16% band. This indicates pricing is sensitive to a range of factors and requires careful appraisal before offering to the market for sale.
However, where the circumstances are right, vacant offices are still finding buyers, and there are clearly a growing group of well-capitalised buyers active in the market for income-producing secondary offices. This has already shown up in an improved sales rate for these types of asset at our auctions in the first half of this year.
Accordingly, this may be an early signal of the classic asset demand cycle where sales volumes rise first, and pricing follows. For now, it seems that whether an office is empty or half full, willing buyers can be found.
