The commercial property auction sector saw sale volumes surge by 30% in 2014 as new investors were attracted to the sector and there was an increased supply of stock.
The latest cPAD (Commercial Property Auction Data) report from Acuitus and IPD says that investor appetite for long-term secure income with capital growth potential led to some of the lowest yields being achieved in the auction room since 2007 with some investments selling for yields around 3.75%.
The auction room is steadily attracting larger assets with the average lot size in 2014 increasing year-on-year from £564,000 to £656,000.
Concerted buying is sharpening yields and the average yield gap between prime and secondary property selling at auction in 2014 narrowed to 362 basis points from 452b as yields hardened.
Acuitus auctioneer, Richard Auterac, comments: “There is clear evidence that the commercial property auction sector is continuing to strengthen and mature.
“Growing numbers of investors are using the auction platform. They are attracted by the prospect of higher returns than they can get on gilts and bonds, and also the capital preservation that UK property can provide.
“With more stock now flowing into the room, more readily available debt finance and new investors utilising auctions, the outlook for 2015 is strong.”
cPad is a joint initiative between Acuitus and MSCI-IPD and utilises auction sales data from EIG to provide a unique perspective on the commercial property market for investors. It creates a valuable snapshot of today’s market and draws on economic analysis by IPD to set the market in the broader context of the wider economic environment, consumer confidence and retailing.
Colm Lauder, Senior Associate at MSCI Real Estate, comments: “2014 was the first year since 2010 that the UK property market has seen continuous month-on-month growth.”
“This was also the case for the retail sector – which represents the majority of assets sold at auction. Although the sector has continued to lag both offices and industrials in terms of performance, the High Street experienced a year of continued value growth in 2014.”
“Yields have hardened for secondary as well as prime retail assets. Sustained value growth in the secondary market has attracted increasing numbers of investors, driving down yields. Similar historical cycles have shown that in this situation, investors have increasingly turned to higher-yielding assets, which has led to an increase in demand.”
To download the latest cPad Market Flash, please click here
