Investors were undeterred by the latest UK interest rate rise as the Acuitus commercial property auction on November 3rd raised £20.7m with the sale of 95% of lots offered on the day.
The standout lot of the sale was a substantial prime retail parade in Newcastle’s city centre which sold for £4.9m. The Grade II-listed property at 139-153 Grainger Street is next to Eldon Square shopping centre and currently produces annual rental income of £560,225. Occupiers in the 22,344-sq ft property include Urban Outfitters, Yo Sushi and Dr Martens.
Charlie Powter of Acuitus comments: “This demonstrates the continued appetite of investors for properties of scale which are well-located and offer asset management opportunities. These institutional quality properties are now in the reach of equity-backed investors”.
Elsewhere in the sale, a substantial high street retail asset at 73-74A Broad Street in Reading sold for £1.7m at a net initial yield of 7.8%. The property comprises two retail units which produce combined rental income of £141,000 with the majority of the income secured on KFC on a lease until 2037 with a tenant’s break in 2032.
In London, a 1,466 sq ft medical centre at 98 Crawford Street W1 sold for £1.1m to an overseas investor. John Mehtab of Acuitus comments: “The ground and lower ground property is let to Charterhouse Clinics on a lease running until 2037 at a current rent of £60,000. The sale price reflected a net initial yield equating to 5.1%.
“The current exchange rate for sterling makes assets of this type additionally attractive overseas investors.”
The demand for healthcare investments was further underlined by the sale of two dental surgeries in Worcester and Runcorn which sold for £387,500 and £327,000. Jon Skerry of Acuitus comments: “Even though the leases on both these assets have tenant break options in 2024, their sale – at yields of 7.3% and 7.9% – reflects the confidence that investors have in the sustained strength of healthcare-related assets”.
Former commercial properties which now offer residential development opportunities also remain in demand. A vacant 6,474 sq ft office building with 33 parking spaces opposite Fareham Railway Station in Hampshire sold for £725,000. David Margolis of Acuitus comments: “Given its location opposite the station and its substantial site area, this property was not only of interest to owner occupiers but also to property companies looking to a change of use for residential redevelopment. There is concerted demand for this size of in-town site”.
In Scotland, two buildings on Westpoint Business Park estate in Aberdeen also found buyers. The 15,394 sq ft 4 Westpoint currently produces annual rental income of £238,607 on a lease expiring in 2029 with a tenant break in 18 months. The lot also included a vacant car park. It achieved £1.125m whilst the vacant 43,128-sq ft 1 Westpoint sold for £500,000. Mhairi Archibald of Acuitus comments: “We acted for a major fund on the sale of these assets that both offer immediate asset management potential for reletting or repurposing”.
While the interest rate rise on November 3rd had been anticipated, Acuitus Chairman, Richard Auterac, believes that the sale was further evidence of the strength of the auction sector and its ability to meet the needs of both buyers and sellers at times of economic uncertainty.
He comments: “Our analysis of commercial property auction sales through Q3 and into the November sales indicates a hardening of yields for income-producing properties which, in part, can be attributed to the majority of properties having lower rebased rents.
“Although the increases in interest rates will make finance more expensive, they will have less of an impact on investors who are acquiring assets at auction without the immediate need for debt.
“For investment funds, REITs and insolvency practitioners who are looking to liquidate assets in a timely manner, the large pool of new ‘cash-rich’ private equity investors who are buying through Acuitus auctions, are an attractive target for asset disposal strategies.”
“Our pricing expertise and sustained contact with potential buyers is a prerequisite to getting the right result for our sellers. This engagement with target buyers in the weeks leading up to an auction is vital and – because our auctions are broadcast live – this dialogue continues right up to the point of sale.”
Instructions are now invited for the next Acuitus broadcast auction of 2022 which will take place on Thursday, December 15th.
