Intense competition for the most sought-after investments is driving down yields, according to Allsop’s summer review of commercial auctions.
The average yield for the highest-quality assets has been squeezed down to around 3.5% in the first half of 2016, against a five-year average of 4.25%, the report stated.
It said: “The poor returns on cash, with clear signals that rates might fall even further, have driven an increasing number of investors to property, with significant competition for the best investments in the best towns.”
Demand for bigger lots has risen, with 96 lots priced at more than £1m sold in the first six months of 2016, a 28% year-on-year increase.
Receivership sales are also on the up, representing 23% of sums raised, compared with 5% last year. This is largely seen as the result of the unwinding of large debt portfolios.
Private property companies accounted for 48% of sales, down from 64% in 2015. Meanwhile, institutions disposed of £43m of properties, up from £29m in 2014.
The report said: “It will be interesting to see, over the rest of the year, if some of the retail funds will use auctions to dispose of some of their smaller assets in order to release cash to meet redemptions.”
Retail assets accounted for three-quarters of sold lots, bringing in £243m – a 25% rise on the first half of 2015, and a third of the total sums raised.
Allsop expects demand to continue for well-located, well-let properties, but says buyers of secondary and tertiary properties could become more risk-averse, post-referendum.
