Brum steer A few West Midlands agents are daring to think more positively about prospects for the market, reports Stacey Meadwell
Birmingham has officially reclaimed the title of England’s second city from Manchester, according to Cushman & Wakefield’s European Cities Monitor. With stories emerging that London’s property market may be coming out of recession, will the West Midlands powerhouse follow suit?
When agents in the region were presented with EG‘s sentiment survey at the beginning of the year, their responses were tinged with more than a little January blues. The figures for the first half of the year justified their feelings.
For example, in Birmingham, office take-up reached just 197,000 sq ft. In 2008, the total for the year was 929,000 sq ft (see p92).
But there have been some positive headlines in recent weeks. Targetfollow is thought to be about to land the largest tenant yet – said to be for around 40,000 sq ft – at its Baskerville House office development in Birmingham, which was completed in 2007, and ProLogis has secured a tenant for a 314,000 sq ft speculatively built shed at its ProLogis Park Midpoint scheme in Minworth.
Deals such as these seem to be giving the region’s property professionals a bit of a boost, with sentiment from our last survey shifting firmly from the market being “in the full grip of recession” to “seeing conditions easing”.
Looking forward six months, a few respondents are daring to be outright positive, with more than one-quarter feeling there will be substantial improvement. However, most of the rest believe there will be no market improvement.
Drilling down, the results are more polarised. Like surveys conducted elsewhere in the country, the investment market has garnered the most positive feedback. There has been a big shift as regards the health of the market in the next six months. In January, two-thirds of respondents felt “pessimistic” or had “some worries”, but in this survey, just under 65% chose “things on the mend” or “confident”.
There have been some important investment deals – Land Securities has sold a one-third share in the Bullring shopping centre, and one or two high-profile buildings have come to the market, such as Bank House in Birmingham.
Ed Gamble, head of investment at Jones Lang LaSalle, says: “Bank House is one of the best multilet buildings on the market and will attract a lot of interest. The confidence is there and people are seeing yields come in a little.”
With increasing reports of funds returning to the investment market, the availability of stock, albeit still very little, must be encouraging for investment agents.
Landlords may be comforted to know there is a feeling that there will be no further falls in capital values. The consensus among those who disagree is that values will fall by only 5% (graph 4). Unfortunately, the occupier market, as the Birmingham take-up figures show, is lagging behind. While the number of respondents who expect tenant demand to deteriorate has reduced for every sector, further deterioration is expected.
Rent questions
This view is mirrored in questions about rents. Although the number who believe rents will not fall has increased, nearly half still believe they will fall further.
Landlords of the 950,000 sq ft of grade A space on the market in Birmingham will not be pleased to know that respondents in this survey are more pessimistic about the amount rents will drop. In January, just under 10% thought rents would fall 10% in the coming six months, but that number has risen to just over 20% in the Q3 survey (graph 6).
Gary Cardin, partner and head of the Birmingham office at Drivers Jonas, says: “The investment market is showing some movement, but agency and development are struggling to come to terms with the market and occupier demand.”
So, there are mixed feelings in the West Midlands property industry. The investment market seems to be following trends in the capital and elsewhere, but the occupier market has some way to go before the sentiment barometer can truly move from “change” to “fair”.
