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Investors return in latest commercial auction survey

Simon Parker, Head of Commercial Auctions at Savills, comments: "This change in sentiment from investors is definitely an encouraging sign for the market and represents the renewed investor confidence. It is also very interesting as 16% of buyers predicted further falls in 2010 and while judging the bottom of the market is crystal ball gazing, these cautious respondents must be fairly confident of a bounce back in 2011 if they are looking to buy now."

When assessing where buyers are looking to invest over the next 12 months, Savills research notes that there is a broad spectrum of target regions and sectors. However, the South East of England clearly dominates accounting for 52% of requirements. Surprisingly the retail sector, although important, did not dominate buyers’ appetite and Savills records a wide range sectors of interest from healthcare to offices and industrial.

When asked to rate buying strategy, unsurprisingly the most important rationale for investing is income return, which reflects the importance of security. With a limited debt market, most buyers in the market are cash rich and are seeking better returns and security than they will get from bank saving rates and other forms of investment.  This demand for income return within the commercial property investment market ensures that lease length also remains crucial. Those respondents that placed lease length in the ‘vital’ category are mainly interested in high street shops and healthcare properties.

In contrast those respondents that believe that lease length is ‘irrelevant’ plan to target residential and standard industrial property during the next 12 months. The research also confirms that those investors predominantly interested in high street shops, supermarkets and in-town offices see tenant strength as ‘vital’.

Simon continues: "There are two definite buyer categories currently in the market, both cash rich but the first, and largest, has a defensive strategy looking for secure income where increases in asset values are less important. The other is the entrepreneurial investor looking to acquire high risk properties at a discount price, aggressively asset manage to maximise value and look to trade on in the future. The auction market can accommodate both types of buyer as the properties and prices they seek are very different."
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