The four-year decline in the prices paid for retail property sold in UK auction houses has slowed according to data released by industry analysts IPD.
The IPD UK Retail Property Auction Index, produced in conjunction with leading commercial property auction house Acuitus, has been monitoring the performance of retail property sold at auction for ten years.
During the first quarter of this year the index tracked the sale of £55m worth of retail property and recorded a small rise to 89.2.
While this is still a 0.9 per cent fall in capital value year-on-year it is, nevertheless, a welcome reflection of increased investor interest in the retail property market.
Explaining the results of the index, Greg Mansell, head of research at IPD, said in a press release; “Sales at auction give a rather alternative perspective on the future of the UK’s high street.
“While in other areas of the commercial property investment market buyers are concentrating almost exclusively on prime assets let on long leases, the investors who buy at auction are taking a less risk-averse approach to investing.
“If they buy at today’s prices, the owners can offer a level of rent that will attract retailers into empty space and drive income returns.”
With yields standing at an average of 9 per cent investors have greater freedom to manage their assets actively but long-term success depends on retaining existing tenants or attracting retailers to avoid being left with an empty property.
Richard Auterac of Acuitus says that although first quarter auction prices exceeded those of the final quarter of 2012, it would be premature to assume the retail market has turned the corner.
“This slight improvement in the index is a sign that experienced property investors now believe that it is worth buying shops selectively on the basis of what are radically re-based capital values and rents,” he said.
He concluded by warning that the retail sector is not a market for inexperienced investors at this stage because of the levels of asset management required to produce long-term returns.
Previous Post
Prime Rents Increase in German Office Market
