One veteran auction trader said bidding was so competitive on the best retail stock at Allsop’s sale this week that he almost came away empty-handed.
“There were a lot of people chasing after good stock, a lot of competition,” said investor Kishor Ruparelia. “I couldn’t buy much.”
For Allsop commercial auctioneer Duncan Moir, the mood at Claridge’s, W1, was “very encouraging”. The total raised was £87m, with 84% of the catalogue selling.
Overall, grade-A retail yields remained constant from Allsop’s February sale at 5.6%, and grade-B yields sharpened to 7.8% from 8.8%.
The sale on Monday 27 March took place the day before the prime minister, Theresa May, signed the letter that triggered Brexit.
“Whenever you have political uncertainty, then something concrete such as property has its appeal enhanced,” Moir said.
“The economic activity we are seeing with the inflationary pressure in the market makes real estate an attractive proposition.
“There is an assumption that rents will keep pace with inflation, particularly where leases are linked to RPI.”
The total raised at the sale was down slightly on the same month in 2016, when Allsop raised £102m with a success rate of 92%. But it was up on March 2015, when the firm raised just under £70m (also a 92% success rate).
Strong market
“The underlying flavour was that the market for quality property is still strong,” Moir said.
The highest price paid for a lot in the room was more than £2.9m for a property in Swindon, Wiltshire, a yield of 7.11%. It is let to Barclays Bank until 2027 and was guided at £2.6-£2.7m.
Retail parades in London were as popular as ever. A high-street property in Wood Green, N22, made up of two ground-floor shops and a maisonette with lapsed planning approval for nine flats on the upper floors, was sold to a London buyer for £2.4m, a 5% yield.
Multilet investments were especially popular, as bidders chased lots that spread the risk of tenant default.
Ruparelia came away with lot 81 for his business partner. The freehold shop and residential investment in Esher, Surrey, was knocked down at £1.1m, a yield of 5.5%.
The shop is let to an estate agent until 2024 at a current rent of £45,300 with a rent review due in 2020. The tenants of the maisonette are renewing their AST at £15,450 pa.
Allsop auctioneer George Walker said appetite from domestic and overseas private investors for well-let assets across all sectors was very strong.
A specialist medical fund bid against private investors for lot 87, the Lawson Road Health Centre in Norwich, ultimately paying £2.9m (5.2%).
Leisure sector
There was high demand for the leisure sector, with lot 83, a McDonald’s by the M1 in Chesterfield, selling for £1.64m (5.1%) to a high-net-worth individual who is a regular buyer at auction.
“With the Bank of England recently upgrading its economic forecasts, we see this demand continuing to strengthen,” Walker said.
Moir said he was continuing to see residential investors make the switch to commercial because of the increasing tax and regulatory burden on buy-to-let. He added: “It is steady as she goes, with the expectation of more people coming into the market as interest rates continue to be low.
“The resilience of the UK economy is very encouraging for investors, particularly as tenants have to continue to pay rent.”
Clients were also finding that the banks were becoming more willing to lend, he said.
However, he added that there were clouds on the horizon. “No one knows what effect Brexit will bring to the market.”
Grantham’s George Shopping Centre is sold on for £2.7m
Trading in the auction room was busy. One lot, the George Shopping Centre in Grantham, Lincolnshire, was bought at auction within the past 18 months. With more than 45 well-managed lettings now in place, the lot went under the hammer on 27 March for £2.7m, an increase of more than £500,000 since it was last sold. It was guided at £2.7m-plus. The sale price reflects a yield of 13.59%. Part of the property is a grade II listed building dating back to the 1600s. It was converted to a shopping centre in 1990 and is let to tenants including Pizza Express, Edinburgh Woollen Mill and Grantham College.
Allsop Commercial, Claridge’s, W1, 27 March
- Total raised: £87m
- Success rate: 84% (131 of 156 lots)
- Sold under the hammer: 103
- Sold prior: 24
- Lots sold for more than £1m: 25
- Retail lots raised £61m (70% of the total)
- Lots in London and the South East raised £37m (43% of the total)
