The show must go on – on stage where it belongs

COMMENT As a representative for the private investor, mastering the world of online auctions during Covid-19 has been vital for the Prideview team. A year on and we’re proud to have executed almost 30 transactions in online-only auctions totalling about £20m, with this month’s sales including an 11-year McColl’s investment in Alford, Lincolnshire, and a high-yield 11% retail building in Wooler, Northumberland, via Allsop. So what was our experience of the process? As with everything this year, from home schooling to winter walking, there are pros and cons. For sellers, the sales process hasn’t changed save for expected difficulties arranging internal inspections and photos. To an extent the buying process hasn’t changed either – the deadlines remain strict, which always focuses circumspect buyers. In terms of reach, it’s arguably wider than ever online, with people from all over the world theoretically able to compete on a level playing field. Property marketing has improved with user-friendly websites and regular emails replacing those Argos-style catalogues. It’s also convenient for buyers – no need to head into London, get dressed or take time off work. Sales rates have remained remarkably strong and, put simply, the auction market has proved its worth to the functioning and liquidity of the real estate market. What is lost, virtually But scratch further under the surface and things are not all rosy. We sold 12 properties in auction during Covid-19 for clients for about £7.5m, eight of which were sold prior, two sold after and just two sold “in the room”. Interestingly, the eight lots that sold prior went for an average of 5% above guide, however the four that sold in auction or after went for an average of 5% below guide. What could explain this clear lack of confidence in leaving lots to sell “in the room”? While online and telephone bidding has been around for some time and online auctions do provide a wider reach, the loss of the ballroom means the loss of the very essence of what auctions are – live bidding in the room, trading, the hustle and bustle, where the market meets. What online-only auctions do is effectively cut out the middle man. This has been successful in some industries, but auctions sell real estate, not shoes. And there are no returns. Buyers that buy once in a while tell us they are bombarded by emails from all angles. Processing all this information isn’t feasible, and probably not worthwhile given that the most important information is that which is usually traded between agents and representatives – the actors that have been sidelined from online-only auctions. This is a big reason why ballroom auctions work so well in our view – the agency service can play its part. And speaking of service, until someone creates an algorithm to replicate the remarkable artistry of auctioneering, can sellers really rely on the machine to do what we see so often in the ballroom – auctioneers teasing that extra £10k out of bidders again and again? And what of blind bidding – the realm of traders looking to nick lots where bidding is thin – it’s not possible any more. In fact, bidding in general has become cumbersome. Pre-registration, bidding deposits and identity checks are all required, with some of these likely to remain when in-room auctions resume. The show must go on Finally, it’s not too rash to say that the buyers and sellers of commercial property tend to fit a demographic that isn’t so tech savvy or time-poor, one that’s feeling increasingly isolated from the online marketplace. If auctions can’t cater for them, the private market will. Back to our own sale experiences. Our standout performer was a Domino’s takeaway investment in Southampton with 11 years term certain which sold prior for £515k/5% gross (19% above guide) – a high-quality blue-chip investment for which competition remains as strong as ever. Could it have really caught fire in a ballroom auction? Our “worst” sale (it was still a sale!) was an unoccupied Barclays Bank near Manchester with two years certain which sold “in the room” for £250k/12% gross (9% below guide). Could this have got some legs with a few impulse buyers taking punts? So hats off to the leading auctions houses for doing their level best to put together an online show for buyers and sellers to enjoy throughout the pandemic – nobody expected stellar results this year, but what continues to shine through as clear as day is that quality assets remain in demand, and much maligned high-yield retail still has a price. The show must go on, and indeed it must do so back on stage where it belongs. Priyesh Patel is an associate at Prideview Group