Strong demand and limited supply drove rents in the Midlands upwards, according to DTZ Debenham Thorpe’s annual report on the region.
But the firm warns that fears over an economic slowdown are leading to a pessimistic outlook for the next twelve months.
During 1998, rents on office and retail space rose, mainly due to restricted supply. The distribution and warehouse market also fared well, but the market for manufacturing premises remained static.
The region’s major centres, Birmingham in the west and Nottingham in the east, fared well. Rents on prime and secondary offices rose in both city centres. Prime office rents in Birmingham now stand at £199 per sq m (£18:50 per sq ft) compared with £194 per sq m (£18:00 per sq ft) this time last year. Rents in Nottingham have risen from £129 per sq m (£12:00 per sq ft) to £137 per sq m (£12:75 per sq ft) over the same period. But there are still few signs of speculative development, mainly because of a shortage of suitable sites, the report says.
Retail rents also increased over the year, particularly in Birmingham, where they have risen from £215 Zone A at the end of 1997 to £335:00 Zone A, fuelled by a shortage of quality retail space. Demand for industrial space has remained steady across the region, despite a struggling manufacturing sector, but there has been a noticeable change in the type of space required. A year ago, 55% of requirements were for manufacturing space and the remainder for distribution premises. The pendulum has now swung the other way, with 65% now looking for distribution space. Rents have remained steady or risen slightly over the past twelve months, peaking at £56.50 per sq m (£5:25 per sq ft) for prime industrial space in Birmingham.
Investment activity during 1998 was centred on the retail sector, but activity has cooled slightly over the second half of the year, says DTZ. According to the IPD Monthly Index, property returns in both the east and west Midlands peaked in July, with the total return for the year to October standing at 13% and 13.9% respectively.
The report concludes by saying that rental growth across all sectors is likely to be “dampened” by this year’s widely-predicted economic slowdown.
EGi News 13/01/99
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