Private investors are targeting commercial property assets in rapidly increasing numbers. Richard Auterac, chairman of commercial auction house Acuitus, looks at the properties they are finding attractive – and why
Private property
Kentish Town, London, NW5
- Sold for: £1.74m
- Seller: Private property company
- NIY: 4.7%
- Type: Lock-up shop
- Depth of demand: High
- Rent: £87,640
- Let to: Holland & Barrett
- Terms: 15 years from 2015 with tenant break in 2025
- Attractive to: HNWIs looking for capital appreciation
- Sold: December 2016
Kentish Town, London, NW5
- Sold for: £985,000
- Seller: Private property company
- NIY: 3.8%
- Type: Lock-up shop
- Depth of demand: High
- Rent: £40,150
- Details: Two shops and two-floor dental surgery
- Let to: a café until 2034
- Attractive to: HNWIs looking for capital appreciation
- Sold: February 2017
Comment: There is a scarcity of good-quality investments offering capital appreciation as well as secure income. Where the location is strong and there is ease of management, demand for these lots by high-net-worth individuals exceeds supply. Investments in London attract a wide range of national and international buyers who do not ordinarily get the chance to access these opportunities.
Lewisham
- Sold for: £2.2m
- Seller: Private property company
- NIY: 4.4%
- Type: Shop and dentists Level of demand: High
- Rent: £103,500
- Details: Two shops and two-floor dental surgery; potential change of use to residential
- Attractive to: Property companies looking for capital appreciation
- Sold: February 2017
Ilford
- Sold for: £2.92m
- Seller: Private property company
- NIY: 4.7%
- Type: Bank
- Level of demand: High
- Rent: £148,750
- Let to: Co-Op Bank until 2062 with review in 2038
- Details: 5,300 sq ft; potential change of use to residential
- Attractive to: Opportunistic property companies
- Sold: February 2017
Comment: Mixed-use investments where strong residential potential underpins commercial value are eagerly sought after by property companies. Secondary assets are more attractive when there is a residential angle.
Investments
Romsey
- Sold for: £960,000
- Seller: US investment fund
- NIY: 4.6%
- Type: Prominent listed bank
- Level of demand: High
- Rent: £46,950
- Terms: New five-year lease to Barclays
- Attractive to: HNWIs
- Sold: December 2016
Godalming
- Sold for: £1,230,000
- Seller: Private investor
- NIY: 4.4%
- Type: Bank
- Depth of demand: High
- Rent: £81,761
- Let to: Barclays for 20 years from 2006; tenant break in 2021
- Attractive to: HNWIs
- Sold: December 2016
Comment: A thorough knowledge of the UK wealth “hotspots” is a prerequisite for selling commercial property. Successful local economies drive occupier demand and incomes, which attracts capital from not only the region but also from national and international investors. This source of investment is replacing the institutional investors, who have narrowed their requirement search to selected pockets in major cities.
Retail
Hanley
- Sold for: £1.515m
- Seller: Receivers
- NIY: 12.2%
- Type: Town centre retail
- Level of demand: Medium
- Rent: £197,000
- Details: Four high street shops opposite the shopping centre, massively over-rented
- Let to: T-Mobile, Sharps and Holland & Barrett
- Attractive to: Property companies looking for high yield
- Sold: February 2017
Winchester
- Sold for: £2.07m
- Seller: Charity
- NIY: 5.8%
- Type: Shops and residential
- Level of demand: High
- Rent: £128,260
- Details: Unbroken parade in
historic city - Multi-let: to local tenants
- Attractive to: Property-savvy HNWIs looking for secure long-term income
- Sold: February 2017
Comment: There is demand for investments across the UK and across the full range of property sectors, but pricing must reflect the risk profile of the asset and the appetite of individual investors for risk. The strength of the local economy, occupier demand, length of lease, build quality and whether the current rents are sustainable all have a bearing on price and a deep knowledge of the fundamentals of commercial property is required to achieve successful exchange of contracts in the three- to four- week marketing period. Sale rates have been above the long-term average over the past three years in the 85% to 90%+ range.
Industrial
Harpenden
- Sold for: £1,790,000
- Seller: Institution
- NIY: 6.3%
- Type: Industrial
- Level of demand: High
- Rent: £120,580
- Multi-let: Long-term potential for residential
- Attractive to: Property-savvy HNWIs looking for capital value growth
- Sold: March 2017
Crawley
- Sold for: £1,110,000
- Seller: Institution
- NIY: 5.9%
- Type: Industrial
- Level of demand: High
- Rent: £70,000
- Let to: Dyer & Butler
- Details: Good location
- Attractive to: Property-savvy HNWI looking for secure income
- Sold: March 2017
Comment: Former institutional investments are popular and yields for industrial compete with the best retail yields. What’s good for the institutions is also good for the HNWI. They are differentiated in their buying only by lot size.
Vehicle services
Tipton, Birmingham
- Sold for: £3.1m-£3.2m
- Seller: Receivers
- NIY: 6.8%
- Type: Petrol station
- Level of demand: Medium
- Rent: £229,674
- Let to: Rontec from Co-op
- Let until: 2029
- Attractive to: Property-savvy HNWIs looking for secure income
- Sold: February 2017
Mansfield
- Sold for: £1,155,000
- Seller: Private investor
- NIY: 5.8%
- Type: Tyre depot
- Level of demand: High
- Rent: £71,227
- Let to: Kwik Fit (GB)
- Terms: Lease until 2032
- Attractive to: HNWI looking for secure income
- Sold: March 2017
Comment: HNWIs have grown acquisitive in sectors outside high street shops, office and industrials if they can access the long leases that they require. As leases on these property types get shorter, premium prices can be achieved in other sectors such as the motor trade and licensed premises.
This article appears in the latest edition of EG’s Property Auction buyer’s guide, available in newsagents from 20 May. For full and free digital access to the guide, please click here
