Property Investors get over 10% yield at Commercial Auction
On Thursday 18th October 2012, PropVestment attended the Acuitus Commercial Real Estate Auction in The Millennium Hotel in Grosvenor Square, London. We were present with a client interested in a couple lots, that unfortunately were outbid. However the observations told an interesting tale about the UK commercial property sector in particular the expectations of investors.
The first observation was that there was twice as many people as there were seats, leaving us to stand. This shows that the number even took the auctioneers and the hosts by surprise.
Although there were over 50 lots on offer, we could only stay to see the first 30 on offer.
Out of which 22 sold with 8 Reserve Not Met, a success rate of 73%, much higher than other recent residential auctions we have attended.
From the lots that sold the average price was £805k that was on average 15.4% over the guide price. This means that the auctioneers guide prices were under valued and the vendors were also realistic in a sense that reserves were mostly under bid price.
The most interesting statistic to come out was that these lots had an average yield of 10.8%. That is incredible from an investor perspective. Much higher than what we have observed in residential auctions. Many with long all repairing insuring leases means a hassle free and low risk investment for investors.
Commercial Auction Bargains
- Warehouse/Office in Kent in 100% occupancy business park. 13% Yield
- Office building outside Glasgow let to Scottish Enterprise till 2019: 18.8% Yield. Pays itself off by end of lease.
- 48000 sq ft Office Block in centre of Leicester, let to a PCT and RBS: 27.3 % Yield
- LA Fitness, Essex: 29 year lease, 14.9% Yield
Commercial Auction Bank busters
- Sue Ryder charity shops sale and lease, four lots 6.0-6.8% Yields
PropVestment Commercial Auction Conclusion
Overall this was a fascinating commercial auction. A very active market place with confident and assertive investors. Prices were more realistic and investors were getting decent yields. Many lots were low risk with good covenants. However with an average lot size over £800k, its a place for the big boys in the market.
Read our recent Residential Auction observations.