Investors are targeting regional commercial lots with development angles as they search for value outside the capital.
Demand for these is expected to be high at the Allsop and Acuitus sales this month, with opportunities on offer in locations including the Home Counties and Midlands.
John Townsend, auctions consultant at Harold Benjamin solicitors and chairman of development company Secured Property Developments, said demand in the regions for lots priced up to £1m was particularly strong.
“The market is very hot up to that price and the competition is strong,” he said.
Allsop’s sale, on 10 July at Claridge’s, W1, will include a retail investment in Loughborough, Leicestershire, being offered on behalf of a big fund. The two upper floors could be converted into flats. Guided at £950,000-£1m, the building has three shops on the ground floor, including a Subway, which together bring in an annual rent of nearly £77,000.
“People are looking for an alternative to buy-to-let and going into development. A lot of people are going into the commercial market,” said George Walker, commercial auctioneer and partner at Allsop.
“London is not as strong now. But in the regions, where price rises have not been as intense, there is a lot of potential. The value returns are outside London.”
Coming over from residential
He added: “A lot of buyers are coming from the residential side. Building a good portfolio is about diversification, and portfolio buyers like the idea of commercial giving them a clean income. They are familiar with spending to accumulate and the risks,” he said.
A similar lot in Harrow, Middlesex, with a bank on the ground floor and flat and maisonette above, was attracting a lot of interest, he said.
The property, guided at £950,000-£975,000, comes with planning consent for five flats on the three upper floors, and a lease to the bank until 2024.
“Our investors absolutely love this area, and they will be looking to intensify the use there with this property,” he said. “A lot of investors want wealth preservation.”
Richard Auterac, chairman and auctioneer at Acuitus, said that commercial properties with development potential offer an alternative to the investor if the retail fails.
“You have another option and that is important,” he said. “Where people are trying to find value, the upper parts are very important indeed.”
The Acuitus sale, at the Radisson Blu Portman Hotel, W1, on 13 July, will include a retail and office investment in Datchet, Berkshire, guided at £1.1m with a annual rental income of £93,500 (pictured).
“There is probably not a lot in it between offices or residential, and if residential returns start to exceed office values, then redevelopment is possible,” he said.
An office building in Coventry could also lend itself to residential conversion. Guided at £1.6m, the property is close to the city’s railway station and produces an income of almost £143,000 pa.
Auterac said: “The offices are underpinning the residential value, with the returns broadly the same. You could re-let the three vacant office units or convert the building to residential. It is in the balance.”
David Callaghan
