Commercial auction review 2011 - Allsop

Commercial auction
review 2011
81% Success rate
602 Lots sold
Over
£344.4
Million raised

Commercial auction review 2011
Contents
Introduction
2011 Highlights What Sold?
The Market
Analysis
Regions
Yields
Sectors
Sellers
Buyers
Conclusion
Results 2011
Contacts
2012 Auction dates

Commercial auction review 2011
Introduction
Over the course of 2011, Allsop held six commercial property auctions, offering 741
properties to the market and realising over £344 million.
Each sale offered a different blend of stock and range of values. Each was an important
reflection of market activity and sentiment at that time. Despite the challenges posed by
the economic instability throughout 2011, the Allsop auction rooms remained busy with
competitive bidding driving strong prices.
Allsop has worked closely with its clients to match reserves to buyers’ aspirations and
in doing so achieved an 81% success rate for the year against an industry average of 75%.
Auctions continue to offer a justifiable route to market due to the transparency, speed and
certainty. As market leaders, with the largest investor specific database in the industry,
Allsop can market properties to a wider audience than ever before ensuring that best price
is realised on the day.
We have created this report to give you an informed opinion of the auction market through
analysis of our results from 2011.
81%
Success rate
741
Lots offered
602
Lots sold
Over
£344.4
Million raised
Over
69,000 visitors
to each online
catalogue
Over 500
attend each
auction

Commercial auction review 2011
2011 Highlights
What Sold?
Retail
Retail
retail
Freehold Retail and
Residential INVESTMENT
West Wickham, Kent
Rent reserved: £27,250 pa
Tenant: Individual
Guide price: £350,000+
Result: £401,000
Net initial yield: 6.5%
OFFERED BY executors
Freehold shop investment
Burnley, Lancashire
Rent reserved: £19,000 pa
Tenant: Subway Realty Ltd
Guide price: £255,000
Result: £227,000
Net Initial yield: 8.13%
OFFERED BY RECEIVERS
freehold bank investment
East Ham, London E6
Rent reserved: £120,000 pa
Tenant: Bank of Scotland Plc
Guide price: £1.75 - £2 million
Result: £1,980,000
Net initial yield: 5.7%
OFFERED on behalf of receivers
retail
Retail
RETAIL
Freehold Bank investment
Bicester, Oxfordshire
Rent: £47.800 pa
Tenant: Barclays Bank
Result £1m
Net Yield 4.5%
OFFERED BY private investors
Freehold Parade of shops
Winchester, Hampshire
Rent reserved: £253,300 pa
Tenant: Monsoon Holdings Limited
and other
Result: £4,525,000
Gross initial yield: 5.25%
OFFERED BY private property company
Freehold Betting Office
Kendal, Cumbria
Total rents: £15,200 pa
Tenant: Coral Racing Ltd
Guide price: £200,000 - £225,000
Result: £243,000
Gross initial yield: 6.26%
OFFERED BY private property company

Commercial auction review 2011
2011 Highlights
What Sold?
office
WAREHOUSE
london
Business Unit Investment
Winchester, Hampshire
Rent reserved: £105,000 pa
Tenant: Hampshire Country Council
Guide price: £1.1-£1.15M
Result: £1.2M
Net initial yield: 9.92%
Freehold Trade Park Investment
Norwich, Norfolk
Rent reserved: £117,512 pa
Tenant: ATS Euromaster Limited and others
Guide price: £1.1M - £1.2M
Result: £1.075M
Net initial yield: 10.3%
OFFERED BY PRIVATE PROPERTY COMPANY
Vacant Club
Conservative Club,
Kings Road, Chelsea, London
6,458 sq ft over four floors
Guide price: £2M+
Result: £3.09M
OFFERED BY trustees
Retail warehouse
Leisure
Mixed Use
Freehold Cash and
Carry Investment
Blackpool, Lancashire
Rent reserved: £132,000 pa
Tenant: Booker Ltd
Guide price: £1.3M - £1.35M
Result: £1.33M
Net initial yield: 9.4%
OFFERED BY PROPERTY COMPANY
Freehold Restaurant
Leicester, Leicestershire
Rent reserved: £40,500 pa
Tenant: Ask Restaurants Ltd
Guide price: £690,000 - £700,000
Result: £700,000
Net initial yield: 5.5%
OFFERED BY PRIVATE PROPERTY COMPANY
Freehold Shop and Residential
Old Coulsdon, Surrey
Rent reserved: £54,770 pa
Tenant: Individuals
Guide price: £600,000 - £650,000
Result: £600,000
Net initial yield: 9.13%
OFFERED BY private investors

Commercial auction review 2011
2011 Highlights
The Market
Most commentators and Investors would be pleased to see the back of 2011 were it not for the further
uncertainty promised for 2012. Allsop’s Commercial Auctions had an encouraging start to 2011 with a
£60 million sale, and 81% of all lots sold. However, the March Sale coincided with weakening market
sentiment and the resultant price correction affected the result. The sale total at £47.87m was 14% down
on the previous March sale with a similar drop in the success rate. From this point sales were largely
comparable with the previous year. The weight of bad news from the Sovereign debt crisis, banking crisis
and the prospect of the UK economy entering recession left Investors unsure of what the future might hold.
As a result the December sale was our smallest for 3 years with a success rate on the day of just 68%.
Thankfully, with sales after, this has now risen to a more respectable 81%.
Against a gloomy economic backdrop it is, however, easy to forget that across the wider property market in
2011 over £3,330,000,000 of both Commercial and Residential property was bought through the auction
rooms. With so little debt available most of this property was bought with cash, by Private Investors. These
Private Investors are in the main of two types: first, those looking for both safe haven and a better return
than holding cash in the bank. These buyers require the security of properties let on the longest leases to
the best covenants. The second group are buying poorer quality lots where, with some local knowledge,
weaker stock can be improved and eventually sold or retained for a higher yield. This latter group are
clearly highly price sensitive.
Interestingly 2011 has seen the re-emergence of the traders who for a number of years have been
conspicuous by their absence. A number have dipped their toes back in the market and made portfolio
purchases at discounted levels, which have been successfully broken up through the auction room at a
decent profit; the sum of the parts quite clearly being greater than the whole.
2011 saw a large number of buyers from overseas, ranging from Europeans looking for a safe haven
outside the Eurozone, to cash rich Far Eastern buyers. Whilst these buyers are important and growing in
number it is still the case that approximately 40% of all the buyers at our sales are based within 20 miles
of the property purchased. It is these investors competing against buyers from further afield that vendors
have been keen to engage by using the Auction process. These buyers typically buy occasionally rather
than on a regular basis.
The following pages give examples of the type of stock we are selling, (we have not just pulled out all the
pretty ones!) Breakdowns of the market sectors we have sold in and some analysis of the buyers and
sellers at our Auctions.

Commercial auction review 2011
Analysis
Regions
Regional distribution (by volume) allsop commercial auction 2011
6% West Midlands
4% Scotland 3% Wales
3% East Anglia
5% East Midlands
27% South East
12% North West
8% South West
27% London
5% North East
Regions Total amount raised Regions Total amount raised
n London £121m n East Midlands £14m
n South East £96.7m n North East £10.6m
n North West £29.2m n East Anglia £9.1m
n South West £25.6m n Wales £9.0m
n West Midlands £22.8m n Scotland £6.4m
London continues to be the centre of the commercial investment market, where the capital’s auctioneers
accounted for £700m some 60% of the total UK sales. While the makeup of our own catalogue has been
traditionally an even split between properties in the South East and the regions, the “flight for quality” as a
result of market turbulence led to a swing towards the South East both by buyers and sellers. Commercial
investments in all sectors in London have a strong following as do retail investments in the South East.
While regional volumes have eased back to 47% regional sales still amounted £127 million over the year.

Commercial auction review 2011
Analysis
Commercial Yields
Allsop Commercial Auction Net Retail Yields (single let)
& Borrowing rates (monthly averages) in 2011
9
8
B-Grade Yield
7
6
A-Grade Yield
%
5
4
3
2
1
5 Year Swap Rate
Bank Rate
0
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
n A-Grade Yield n B-Grade Yield n 5 Year Swap Rate n Bank Rate
The long run yield for good secondary retail investments has proved to be remarkably resilient, showing only
modest fluctuations in the range 6%-7% over the last 12 months. The traditional link with the cost of money
(usually measured by the 5 year swap rate) would appear to be less strong, due in the main to a lack of liquidity in
the lending markets. The low interest rate regime is forcing investors to look for better returns than keeping cash
on deposit, which in turn has driven many new entrants to look at property as an alternative investment medium.
These new investors have a strong preference for cleaner, more straightforward properties, preferring to ignore
the more management-intensive investments. The result of this has been a marked softening in demand for lower
quality property, and yields have moved out in some instances to in excess of 10%.
There are signs however that professional investors can be drawn back into the market with careful pricing,
particularly on the larger mixed-use buildings, where overall asset pricing at modest capital rates psf can overcome
the short term cost issues that arise due to voids and empty rates.

Commercial auction review 2011
Analysis
Sectors
Volume Sold by Sector at Allsop Commercial Auctions in 2011
9% Leisure
7% Other
6% Industrial
10% Office
68% Retail
The majority of properties sold through our auctions are retail investments, accounting for £234,000,000 of sales
in 2011 (68% of the total).
Despite the constant stream of difficult news for the UK High Streets, retail remains popular with investors. The buildings
are usually adaptable in the event of tenant failure, the range of lot sizes appeals to a wide market - from £40,000 -
£4,000,000 was the range for 2011, and the retail business is generally well understood by the private investor.
The on-going demand for retail investments often encourages retailers to raise funds from their operational estates
through “sale and leaseback” arrangements in the auction room. The last 3 years saw Bank, Betting Shops,
Chemists and Pub Chains all well represented and significant sums were raised from the market.
The volume of office and industrial investments remains modest. The overhang of empty office buildings across
the UK, together with an on-going empty rates liability have exerted a strong downward pressure on rents which
prudent buyers are pricing in to their appraisals. Office buildings let on short leases at historically high rents are
particularly at risk and, with many owners reluctant to sell at market levels, volumes remain low. For those vendors
prepared to accept market reality, good demand can be generated, and deals can be done.
Industrials have traditionally been popular as they can prove to be more resilient in a downturn - larger businesses
downsize or smaller businesses wish to start up in inexpensive premises. Vendors of industrials however, for the
same reasons, are reluctant sellers.
The leisure sector has had much prominence of late with significant disposals from Enterprise Inns from their
London estates which ended in March 2011 having raised in excess of £150 million. The volume of pubs and
restaurants investments which came to the market during the year fell, in line with the other sectors, but well - let
buildings continue to be popular.
Data provided by Essential information Group

Commercial auction review 2011
Analysis
Sellers
1.1% Government 6% Other
2.6% Trustees
20.2% Receivers/
Distressed
2.8% Institutions
59.5% Private
1.6% Plc
6.2% Corporate
As expected 2011 saw an increase in instructions from Receivers, increasing to some 20% of the total sales. This
increase in volume from distressed vendors has been somewhat lower than anticipated however, banks continue
to explore their strategic options, given the large quantity of real estate they have taken back into possession.
The majority of vendors remain private investors, but there are increasing signs that many are acting under the
close scrutiny of their lenders. The number of debt facilities that are currently up for renewal has been widely
reported, and many of these facilities are not being renewed. It might be thought that this would have helped
volume, but some borrowers are managing to retain control of assets and withstanding the pressure to sell.
This could well change as 2012 progresses.
We saw a decrease in the volume from corporate vendors, a number of which had used the Auction as a route
for disposal of operational assets by “sale and leaseback”. This is somewhat skewed from previous years during
which we had disposed of a high volume of leasebacks from the banking, gaming and leisure sectors, these
disposal programmes having come to an end.
Local Authorities continue to have a presence, albeit modest, as pressure increases on their financial arrangements.
Many Authorities hold significant amounts of non or under-performing assets, and their continued ownership
is being questioned, particularly when there is no strategic reason to do so.
Data provided by Essential information Group

Commercial auction review 2011
Analysis
Buyers
International and domestic interest shown in the December catalogue
Visits
170 61,809
Over 112,000 registered subscribers
69,061 hits to the December Catalogue from
123 countries
The reach of the Allsop auction marketing has improved globally in 2011. Our on line catalogue is now distributed
worldwide to over 112,000 registered subscribers. In December, the on line catalogue generated over 69,000
visits from 123 countries, the largest foreign interest being from Ireland, the US, France and Spain. This exposure
is relied upon by many clients, particularly banks, public bodies and charities, to support their duty to establish
best price on the day of sale.
Data provided by Google Analyitics

Commercial auction review 2011
Conclusion
It’s not all bad news! Buying and selling is undoubtedly tough in the current climate with Vendors unable
to achieve the high prices of previous years and buyers frustrated by the lack of the type of lots they wish
to purchase. However, in between there is a wide range of property being bought and sold with many of
the sub £2 million lot sizes finding their way into the Auction rooms. Of the £3.33 billion of Residential and
Commercial property bought at Auction during 2011, Allsop’s Auction Teams have sold a combined total
of £632m maintaining our market leading position.
2012 is likely to be at least as challenging as 2011 as the economy teeters on the brink of recession and
events outside the control of the UK affect us. As Banks speed up the process of realising “distressed”
assets, and their liabilities are crystallised, maybe in the second half of the year we might see some “green
shoots” of recovery, and more importantly, competition in the lending market.
As austere times continue, buyers are increasingly attracted to Auctions where genuine sellers can be
found at market levels. Realistic pricing is more important in times of poor confidence than at any other
point of the market cycle. It is the vendors key to generating strong competition and thereby achieving
best price. This pricing discipline, coupled with the global exposure provided by a unique database of over
220,000 registered subscribers for Commercial & Residential properties, helps reassure Allsop Auction
clients that the best price has been achieved.
With a general shortage of stock in the market, at realistic prices, we expect to see increasing interest in
our Auctions in 2012 both from the Vendors wishing to expose their properties to the widest market and
from buyers who are frustrated by the Private Treaty process.
As ever all members of the team are available to discuss your selling and buying requirements and we look
forward to working with you over the coming year.
Results 2011
Auction Date Lots sold Success Rate Amount Raised
February 87 81.3% £60.3m
March 77 84.6% £47.9m
May 99 80.2% £55.1m
July 122 82.4% £66.9m
October 131 76% £77.1m
December 86 74.8% £37.1m
Total 602 81% £344.4m

Commercial auction review 2011
Contacts
Patrick Kerr
+44 (0)20 7543 6701
patrick.kerr@allsop.co.uk
Duncan Moir
+44 (0)20 7543 6704
duncan.moir@allsop.co.uk
Neil Mackilligin
+44 (0)20 7543 6702
neil.mackilligin@allsop.co.uk
George Walker
+44 (0)20 7543 6706
george.walker@allsop.co.uk
Gregor Campbell
+44 (0)20 7543 6703
gregor.campbell@allsop.co.uk
Mark Gower
+44 (0)20 7543 6727
mark.gower@allsop.co.uk
Alex Neil
+44 (0)20 7543 6895
alex.neil@allsop.co.uk
Philip Parsons
+44 (0)20 7543 6891
philip.parsons@allsop.co.uk
2012 Auction dates
Closing Date Catalogue Release Auction Date
17th February 6th March 27th March
12th April 1st May 21st May
1st June 19th June 11th July
7th September 25th September 16th October
26th October 13th November 4th December
NB - The online catalogue is available to Registered Members on the Saturday evening prior
to the Catalogue Release date.