The latest Acuitus/IPD cPad Commercial Property Auction Market Flash shows that the last round of auctions produced a small increase in the volume of property sold but also charts a continuing fragility in yields beyond prime properties.
In July, activity levels – as measured by the amount invested through the sale room – remained broadly steady showing a rise of 4% since May and a 13% increase on February’s auction volumes.
The All-Property Average Yield has weakened further since May and currently stands at 9.3%, the highest in this recession. Further analysis reveals that the gap between prime and secondary has widened from 290 basis points in May to 520 in July – the largest gap of this property downturn.
The market has been hampered by an inconsistent supply of stock but this may be improved by the forthcoming sales in October. Acuitus auctioneer, Richard Auterac, comments: “Since our July auction, we have seen a sharp rise in the number of sale instructions reflecting a recognition by sellers that action needs to be taken now if proceeds of sale are to be received during this calendar year”. Investments in London continue to be the most keenly sought after with the average yield at 6.9%. Investments outside London weakened by 100 basis points to 9.7%. However, the greatest opportunities may lie in the secondary sector where investments have already had factored into prices the downside risks.
IPD’s Greg Mansell comments: “For secondary property there is a growing consensus on pricing. This is being driven by the increasing realisation that there are no quick fixes to the recovery and also by the growing evidence of sustainable lower rental levels. This new re-based property market pricing level will be the base from which prices will again grow when rising GDP feeds into occupier demand.
“For the sellers of these assets, prices may not be exciting in relation to the bubble years but for the buyers it presents the opportunity to buy properties at sustainable rebased rents – potentially a once-in-a-generation opportunity for those who have the requisite skills and the access to equity.
“We need to wait and see when sellers are prepared to increase supply at the new market levels.”
To access the full cPad September 2012 Market Flash please click here
For further infomation, please contact:
Richard Auterac Acuitus +44 (0)20 7034 4851 (richard.auterac@acuitus.co.uk )
Greg Mansell IPD +44 (0)20 7336 9384 (greg.mansell@ipd.com )
