Investor demand at commercial auctions grows

February 27th, 2015 by markflynn

Sale volumes in the commercial property auction sector surged by 30% in 2014 as new investors were attracted by an increased supply of assets.

According to the latest cPad (Commercial Property Auction Data) report from Acuitus and MSCI-IPD, 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 the 3.75% mark.

With the average lot size in 2014 increasing year-on-year from £564,000 to £656,000, this shows that the auction room is steadily attracting larger assets. Furthermore, 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.

“There is clear evidence that the commercial property auction sector is continuing to strengthen and mature,” Acuitus auctioneer, Richard Auterac, commented. “Growing numbers of investors 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.”

He added: “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, a joint enterprise between Acuitus and MSCI-IPD, uses auction sales data from EIG to offer a unique standpoint on the commercial property market for investors, as well as creating a valuable snapshot of today’s market by drawing on economic analysis by MSCI-IPD to set the market in the broader context of the wider economic environment, consumer confidence and retailing.

“2014 was the first year since 2010 that the UK property market has seen continuous month-on-month growth,” Colm Lauder, Senior Associate at MSCI-IPD, said. “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.

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