Simon Riggall of Colliers Conrad Ritblat Erdman puts it down to the cheap price of money. Interest rates at 5% makes a property that offers an immediate return of 7% an attractive bet. Buyers at Colliers CRE auctions are mainly small property companies. 'They're eager to buy and digging deep into their pockets,' said Riggall.

Allsop & Co has a whole 25-lot catalogue in its auction today (4 February 2002) from pensions fund trustees. There are a further 122 lots in the catalogue. The pension fund lots are all well-let, some of them to banks. The rest of the catalogue offers a spread of properties from £100,000 to £4.5 million ($141,000 to $6.4 million) and for a variety of vendors. The biggest lot, with the guide price of £4.5 million ($6.4 million), is on Baker Street, W1. A freehold let to NatWest bank, it comes with vacant flats and offices.

Allsops' auctioneer Duncan Moir agrees with Riggall. 'Cost of money is still modest,' he said. 'Quality income is still selling very well, with pension funds 'evaporating' thanks to weakness in the City.

'The private investor is leading the market. There have been a lot of difficult investment decisions for the long-term private investor. And if he's holding cash, he's not earning much on it.'

In addition, Moir pointed out that not only will an investor be happy to be earning 7% on property he has bought at money borrowed for 5% but, 'he also has something he can go and kick. We have therefore a brisk market.'

Healey & Baker's John Townsend puts the strength of commercial property auctions down to the drawing power of property as an investment. He said that alternative forms of investment are yielding such low rates that property presents an opportunity to provide a return on capital investments.

Townsend believes that buyers are split into two main camps. There are cash buyers looking to replace alternative forms of investment and there are funded buyers purchasing for their own pension fund and going for security of income. 'Auctions are coming more into focus--perhaps because it's a very public way of selling different types of investments. It's reaching the markets that other forms of selling can't reach.'

Healey & Baker's next sale is on 25 February. It has about 90 lots from a mix of vendors, including 40 banks, some institutions, some private property companies and a few public property companies. 'I suspect we'll have the same success rate of 92% that we saw at the end of last year,' said Townsend. 'We had a fantastic year last year, making £202 million ($285 million), compared to £110 million ($155 million) in 2000.'

According to Peter Cunliffe of Jones Lang LaSalle, investor sentiment is still high and sustainable in the foreseeable future as interest rates remain low. 'Availability of finance is still key and there's still not let-up in that,' he said. 'That will, in the future, depend on tenants' ability to pay rent, but there are no storm clouds on that horizon.'

Cunliffe believes that this year will be characterised by institutions continuing to rationalise their portfolios, which will see property coming to the market. 'They've mainly got prime properties and they will want to dispose of sub £3-million ($4.2-million) lots,' he said. 'We will also see property companies trading out properties they have bought in portfolios and corporates disposing of surplus assets. Buyers are mainly private investors.'

JLL's next sale is on 28 February.

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