How the digital trial run could be a game-changer

Specialist online auctioneer BidX1 sold £5.2m of UK stock in April, split between £2.4m for its main UK sale (25 assets sold) and £2.8m for Foxtons’ joint agency sales (seven assets sold). It sold circa £9m across Ireland, Cyprus, Spain and South Africa. Oliver Childs, head of commercial auctions at BidX1 UK, considers the current challenges and long-term impact of Covid-19 on the sector. How were your April sales affected by the crisis? The digital platform facilitates end-to-end online transactions: we had no logistical decisions to make, so our full focus was on advising clients. Many are corporates, whose remit requires ‘best value’ in a given market. Whether we felt that could be achieved very much depended on the asset in question, so we reviewed this on a case-by-case basis with clients. That did mean withdrawing more lots than usual – just over 35% of the April catalogue. We were pleased that the 83% success rate on the day bore out our analysis of the assets which were suitable for sale and less likely to be impacted by the circumstances. The ability to fully market an asset, including the relative importance of a physical viewing, and the availability of other professionals and suppliers who play a role in the process, were key factors. Take sites, for example, where it was still possible for potential purchasers to carry out due diligence unhindered. They performed very well, including multiple lots for JC Decaux and Severn Trent. Across the markets, our business model has mitigated against disruption but being an international firm has made us acutely aware of the scale of this crisis. Spanish citizens have been in very restrictive lockdown since mid-March; we are opening bidding on properties where there is significant interest and sales are taking place, but the focus is really on supporting the Spanish team in what is a very difficult situation. In Ireland, where the government brought in restrictions early to flatten the curve, we’re seeing steady sales; with transactions of just under €7m in April, there is still movement in the market there. We’ve seen traditional auctioneers shift overnight to online sales in order to keep their businesses going. Do you think the current crisis will bring about a long-term change to the auctions market? The ballroom model has, for the time being, effectively been wiped out. While this is proof that digitalisation can make the auction industry more resilient, resilience in the face of external shocks shouldn’t be our core motivation for change. We’ve long championed an innovative, tech-focused approach to property sales, so we do see positive side-effects here: this is an opportunity for the industry to innovate in favour of buyers and sellers. For many sellers, this ‘digital trial run’ could prove to be a game-changer. The level of market intelligence is unrivalled, meaning clients may struggle to return to the relative uncertainty of methods without such clear data to aid decision-making. As an auctioneer, I would struggle to advocate this to clients, who I don’t believe seek the thrill of the unexpected when it comes to their assets! Ultimately, this experience has validated the online model, and perceptions about the best route to market will be permanently altered. I do think this will be a watershed moment for the industry in terms of understanding the benefits of a digital model. Have you had to furlough any staff? Yes, we have furloughed some UK team members. What impact has there been on vendor instructions so far and what do you expect to see going forward? In the period from January to April, vendor instructions aligned year-on-year with 2019 in terms of capital raised. Prior to the emergence of Covid-19, we were expecting to see an uptick in instructions this year, particularly from housing associations, the public sector and receivership clients. We do now think that many of these sales will be put on hold until after the summer – but as the pipeline heats up during that period, we could see a very busy Q3 and Q4. Is finance still readily available to bidders? It’s certainly restricted at the moment. However, most of our bidders aren’t reliant on third-party finance (or will be seeking to finance their purchase at a later stage). Those who are reliant on debt to complete a purchase are less likely to be active at the moment, at least not in the very short-term. How are you handling inspections and viewings? Property inspections for new instructions have not been possible in many cases. That’s not insurmountable as we have so much information available from other sources, but it’s certainly not ideal. For interested parties, we’ve provided more options to carry out due diligence virtually – additional floor plans, video walk-throughs, drone footage, etc. This is less of an issue for many commercial assets, where investment decisions are significantly impacted by factors other than physical viewings – covenant strength, for example. In these cases, drone footage, floor plans and video tours will often suffice. To send feedback, e-mail julia.cahill@egi.co.uk or tweet @EGJuliaC or @estatesgazette