Volume of auction lots falls in the UK

The number of commercial properties available for purchase through auction (496 lots) in the UK during the first quarter of 2008 was half the number available in the same period last year, but sales rates have remained strong at 79% as private investors and high net worth individuals (HNWIs) continue to invest in commercial property, according to the latest Auction Result Analysis System (ARAS) report produced by Jones Lang LaSalle and the Investment Proeprty Databank (IPD).

Richard Auterac, a director and auctioneer at Jones Lang LaSalle, said: 'The volume of lots available has fallen in part as sellers are hesitating to bring properties to market due to lack of alternative investment opportunities once their properties are sold.'

But he said that it was clear from the latest ARAS report that private investors are still interested in buying property at auction. 'The volatility of equities and vulnerability of financial markets is fresh in their minds. Whilst returns from property are lower than they have been, bricks and mortar have a reassuring tangibility and whatever happens to values in the short term, well-let property still produce, crucially for pensioners, a steady income flow. On a more technical level long-term returns on a risk-adjusted basis from commercial property investments match those that you’ll find on equities and when the debt market returns to normality the benefits of some gearing will be available once again.'

He said sale of four out of five properties at auction is encouraging given the backdrop of few investment transactions this quarter in the wider property market. The notable highlights in the ARAS report were

- total investment volume in the auction room dropped again this quarter by 23% to £26mln compared to £33.7mln in Q4 2007
- the rate of fall in the Retail Property Price Index (RPPI) slowed to 0.01% in Q1 2008 compared to 3% in Q4 2007
- prime yields moved fractionally out to 4.36% a change of 0.01% from the first quarter of 2007
- high yields have moved out over 25 base points from the first quarter of 2007 to 7.03%

Auterac added: 'Retail units continue to act as the backbone to commercial property auctions. With an impressive sales rate of 85% of all retail units available, private investors from across the UK and internationally are buying up lots on Britain's high streets with bank sale-and-leasebacks proving especially popular.'