Insights into the Commercial Auction Market in 2019 Annual Review

Strong appetite for commercial assets in 2019 gives boost to Allsop Commercial Auctions

• Auctions raise £433m from 631 lots with an average lot size of £670,000
• 115 lots sold at over £1m
• 2019 success rate of 85%
• December auction achieves 92% success rate – the best of the year
• Office asset sales tripled year-on-year from £14m to £44.7m
• Alternative assets sales grow by 50% from £27m to £36.7m

In its Commercial Auction Annual Review 2019, Allsop reports it raised a total of £433m from 631 lots sold at a success rate of 85% last year. Throughout the year, more than 115 high value lots sold for £1m+. Despite the Brexit related political uncertainty that underpinned 2019, this result compares closely to 2018, but with an increased average lot size, reflecting buyers demand for bigger assets.

2019’s highlights included the December auction, which took place just before the General Election and was one of the strongest for the last three years with a success rate of 92%. Earlier in the year, Allsop sold its largest lot under the hammer, the Covent Garden building accommodating The Lady Magazine, which achieved £12.4m, while the second biggest lot of the year was a parade of shops in Pitsea, Essex, which sold for £4.56m.

Office asset sales by value tripled year-on-year, rising from £14m in 2018 to £44.7m in 2019 as buyers sought stronger yields and rental growth. Despite retail sector turmoil, demand remained high with retail assets comprising 71% of all assets sold.

However, yields have diverged due to high demand for sought after grade-A assets driving up capital values, depressing yields, while poorer quality assets, such as those requiring major redevelopment, have seen rising yields as they are repositioned into other uses.

Sales of alternative assets in 2019 have risen to £36.7m from £27m in 2018, an increase of 50%, with buyers attracted to this asset class by longer leases with fixed or geared increases and the opportunity to diversify their portfolios.

Regionally, half of total sales by value were for London and South East assets, a fraction that has not changed. The value of assets sold in the North East has more than doubled from £21m in 2018 to £53.6m in 2019 and as a proportion on a regional bases of all assets sold, raising from 7% in 2018 to 13% in 2019.

A buyer analysis revealed increasing demand for larger lot sizes of £1m plus from 40% of buyers expressing interest in such lots in 2019 against 35% in 2018.

George Walker, Partner and Auctioneer at Allsop, said: “Investor appetite for commercial assets remained stronger during 2019 than anticipated, despite political turmoil. In demand were assets providing long-term income, opportunity to add value and mixed-used assets. Yields diverged with a flight to quality pushing up prices while lower-quality assets sold if the price was right.

“The year ended on a high note with a three-year record December auction taking place three days before the General Election. It was as if buyers knew that the result would support property investment and we believe that they were right, that sentiment bodes well for the market in 2020.”