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Commercial Auction Summer Review 2015
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Outlook for remainder of 2015

Looking Ahead

2014 was a particularly good year in which the recovery took a firm hold. With the uncertainty of the General Election, the first six months of 2015 were always likely to be a challenge and a test for the market’s resolve…

It could easily have been so different. The surprise Election result was well received and with greater clarity on Government spending plans, confidence among buyers is now back to the levels we experienced last summer. So what happens next?

With over 80% of our buyers declaring an intention to buy again in the next 12 months, there is no doubting the strength and depth of this demand.

Savers and investors continue to be frustrated by the low returns on cash, and when this is combined with the reforms to pension fund regulations (allowing greater flexibility) the attraction of the commercial investment market is enhanced. A number of new buyers are progressing from other markets (buy-to-let particularly) in search of enhanced yields. Stock market volatility also has always driven investors towards the safe haven of “bricks and mortar”. Moreover, the speed and ease with which a purchase at one of our auctions can be made continues to appeal to existing and new buyers alike.

There is clearly an interest rate rise on the horizon, and when it comes it will undoubtedly grab the headlines. The change will be modest however and the market has probably already priced it in. Sentiment is all important and it should be remembered that a rise in interest rates is not necessarily a bad sign, as it will be a clear reflection of strength in the wider economy.

The lack of supply has clearly been a factor and this has had a powerful influence in London and the South East. This in turn has driven a number of buyers to venture back to the regional markets – there will always be a search for value. As the appetite for risk has improved in tandem with the healthy economic climate, the regional markets have seen some encouraging uplifts. Regional yield variations are likely to continue as tenant demand, while strong in some of the better towns, remains patchy in others. These disparities can often present interesting opportunities for the braver buyer.
As always each asset is different and has its own dynamics and peculiarities.

It is our view that these trends will be sustained over the remaining quarter as the recovery continues. It is quite possible that these conditions will stimulate supply in the short term. Some vendors will see this as an opportunity to capitalise on market strength and some lenders may increase the pressure for consensual sales on borrowers, who had previously adopted a “pretend and extend” approach.

We have certainly been encouraged by the results of the four auctions we have held so far this year and are very much looking forward to our sales in October and December. As always, to take full advantage of the current market conditions it is essential to get the pricing right. The continued wide range, high volume and high success rates of our market leading auctions provide us with a unique knowledge of buyers and current market conditions, enabling us to provide our clients with the best advice on marketing strategy and pricing for both individual properties and portfolios.

 

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