Auction house Allsop sold £449m of offices, shops and warehouses across six auctions in 2015 reporting its highest success rate for a decade, with 90% of lots sold.
Commercial property outperformed shares, bonds and buy-to-let in 2015 and could become even more popular with investors who face the prospect of high taxes and reduced allowances across buy-to-let and pensions, the firm said.
Lots at auction ranged from betting shops and banks to GP surgeries and old office blocks. Properties sold by Allsop generated more than £39m in annual rents producing an average net yield of 6.6%, with investors getting an average annual rent for each property of £43,000.
The firm’s Commercial Auctions Annual Review comes weeks ahead of tax clampdowns set to hit pensions and residential property investors. Stamp duty increases, mortgage interest relief cuts and a reduction of the lifetime allowance of pensions will mean thousands of people have to find other ways of investing.
Shares in the FTSE 100 fell 1.3% last year, while the return on UK five-year gilts was 1.0%. Residential yields average around 5.2% – although these would be far lower in London. Commercial property returns were significantly higher.
Allsop claims commercial property also offers several advantages over residential property for investors, with commercial leases often being more convenient as the tenant, rather than the owner, typically has to take responsibility for the maintenance and the bills. Commercial properties are also often let to major chains, reducing risk in returns for the owner.
Allsop believes these various factors could turn many prospective buyers towards commercial property – with auctions a transparent and direct way to enter the market.
Duncan Moir, commercial partner and auctioneer at Allsop, said: “Many properties at auction have low reserve prices, so there is much potential for bargains to be found.
“The range of lots available at auction – GP surgeries, betting shops, shops, pubs and offices – means that pension investors have all manner of choice when it comes to property type, risk and location.”