The proportion of investment-grade assets selling in commercial property auctions last year rose by 10%.
The latest Acuitus/MSCI Commercial Property Auction Data (cPad) report analyses the £1.16bn of commercial assets which sold at auction in 2016, and shows that £820m of these were classed as being of ‘investment grade’. The research defines investment grade property as ‘core and core+ investments for high net-worth investors and property companies’.
Acuitus Chairman, Richard Auterac, comments: “The number of commercial property assets selling at auction in 2016 was up a third year-on-year but this was coupled with an increase in overall asset quality.
“This was very encouraging as it represented increased supply of the £1m+ lots which are favoured by the high net-worth private investors who are increasingly using the auction room to access the commercial property sector.
“The challenge going forward is to increase the supply of investment grade assets to feed this by the high net-worth private investors who are increasingly using the auction room to access the commercial property sector.
“The challenge going forward is to increase the supply of investment grade assets to feed this demand. Potential sellers will be in a good position through this year to realise strong pricing.”
Commercial auction sales remain dominated by retail property which accounted for 70% of sales last year. Of the other commercial property sectors represented in the auction room, offices were notably strong in 2016 – although this was, in part, driven by the potential for residential conversion. Last year, the value of office investment purchases was 20% higher than that recorded in the previous year, and average yields sharpened by 50bp.
Looking ahead to the remainder of year, Richard Auterac commented: “With regard to the lower quartile yield representing more prime properties coming into the auction room, we see continuing strong demand and yields stabilising at lower levels this year.
“However, there is an unprecedented yield gap between the prime and secondary properties currently selling at auction.
“Accordingly, there may be some scope for yield compression by the stronger secondary properties where buyers can see reasonable fundamentals and the opportunity for active asset management.”
A full copy of the report, can be downloaded here