March ’17 Auction Analysis – Uncertainty Continuing to Drive Demand for Quality

Hot off the heels of a busy February round of national commercial auctions, the pace continued in March.

Allsop raised £87M at a success rate of 84%, attributing some of their sales to sellers cashing in on the current demand / supply imbalance, especially for quality stock. Acuitus weighed in with £47M sales at a success rate of 86%, reiterating that quality stock continues to attract both national and international buyers.

The below blue-chip investments are representative of the pricing for quality investments in the current ‘post-Brexit’ environment. To be clear, most lots sold in auction don’t meet our criteria of quality investments and our regular Auction Analysis commentary is not intended to cover those lots; its intention is to give our readers an idea of what good quality, hassle-free properties are selling for in the open market.

Lot 23 – Sue Ryder, Gloucester

Sue Ryder, Gloucester

Description: New Virtual Freehold 2,000 sq.ft. retail unit within a purpose build neighbourhood retail area offering ample parking

Tenancy: Let to Sue Ryder for 10 years from 27/11/2014 for £37,500 p.a. FR&I

Location: Neighbourhood retail zone within a new housing development near Gloucester

Guide Price: £470,000 (8.0% gross)

Result: £505,000 (7.4% gross)

Our comment: We acquired and financed this investment for a portfolio investor at an attractive yield for a blue-chip tenant with 7.5 years on the lease. Whilst some buyers might have shied away from the fact that this new housing development is still partly under construction, our view is that by the lease expiry tenant demand will be robust given the fairly limited size of the neighbourhood retail zone serving this growing community.

 

Lot 93 – Banana Moon Nursery, Greenwich, Greater London

Nursery Greenwich

Description: Virtual Freehold ground floor children’s day nursery measuring 1,798 sq.ft.

Tenancy: Let to a franchisee of Banana Moon for 14 years from 01/02/2016 (break at 10th year) for £37,500 p.a. FR&I

Location: Within and around a new housing development on the Thames, close to Deptford.

Guide Price: £475,000 (7.9% gross)

Result: £520,000 (7.2% gross)

Our comment: We acquired this in auction for a residential buy-to-let investor looking for their first commercial investment. It caught our eye due to the attractive yield, and whilst the location is rather tucked away, it is a rapidly growing area and the D1 usage / children’s nursery business is something highly sought after. Besides where else does one ever see a 7% yield in London?

 

Lot 20 – Cote Restaurants, Guildford

JRGfd_1852Description: Freehold restaurant on ground and first floors with ancillary accommodation above

Tenancy: Let to a subsidiary of Cote Restaurants Group for 20 years from 30/08/2016 for £130,000 p.a. FR&I

Location: High street location in a popular London commuter town

Guide Price: £2.3M (5.7% gross)

Result: £2.45M (5.3% gross)

Our comment: This was a strong price indicative of what the market is paying for the best lots. The popularity of restaurant investments, which don’t share the same problems as traditional retail lots, is soaring. Being a whole building on a high street location in a popular commuter town such as Guildford, it does tick a lot of boxes. There may be a question mark about the high rent, but that is mitigated by the 20 year blue-chip lease. So if you want a deal that must tick every box, you’ll have to pay a top price, but if, as with the first two buys, you can take some calculated risk, there are some good buys to be had.

 

If you are looking for a commercial property investment in 2017 by auction or privately we can assist. We have a number of off-market investments available now, and will be actively buying and selling in the upcoming May auctions, the first since the announcement of the June General Election.  To discuss further and to be added to our active investor mailing list please contact Nilesh stating your requirement.

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