‘It’s time to be inventive’ – Property industry prepares for 2011

INNOVATION in development and agency work in commercial property is key in 2011 as the industry faces up to the long-term effects of new Government legislation.

Last week on TheBusinessDesk.com we looked back at 2010 and, to finish off the year, property professionals cast an eye ahead to what can be expected during 2011.

Mark Swallow, head of the Birmingham office of consultancy Knight Frank, said: “With little new development proposed, high quality refurbishments are becoming more prevalent as owners seek to maximise their assets and attract tenants both in and out of the city, particularly seeking to attract the attention of footloose national occupiers in the market.

“We have already seen a number of refreshed buildings come to the market which have implemented collaborative lettings strategies and secured new tenants impressed by this approach. It is clear occupiers, developers and building owners are looking to implement more innovative approaches.”

Dav Bansal, right, director of Glenn Howells Architects in Birmingham, said: “We know that cautiousness will continue to reign for banks, investors and developers, but for us it’s time to be inventive and innovative. What we see across the sectors is appetite for quality, exciting and sustainable schemes that are realistic and deliverable. Working with clients whose objectives are long term, we are developing ideas now for the next 10-20 years.”

Ian Tudor, director at Bigwood Chartered Surveyors and Auctioneers, said: “We are cautiously optimistic and confident that more buoyant market conditions will prevail during 2011. This will largely be dependant on the banks and other funding institutions regaining an appetite for lending.

“There is pent up demand, particularly for freehold acquisitions in all sectors, as we have witnessed an encouraging increase in inquiries throughout 2010.”

Ian Stringer, regional senior director at the Birmingham office of consultancy GVA Grimley, said: “We expect the same hard slog with very muted occupational demand in most sectors. We anticipate a continued lack of debt finance availability for investment and development opportunities, without a pre-let agreement being secured.

“The industry has high hopes for LEPs and the Regional Growth Fund but there will be huge competition for such a key source of investment.”

David Hayes, left, head of real estate at law firm DLA Piper’s Birmingham office, said: “The market is unlikely to pick up before 2012 at the earliest. During 2011, speculative development will be sparse, with investors driven by location and covenant, and banks understandably constrained on lending.

“However, banks are still supporting sensible propositions, including transactions of some scale. Cash buyers and well funded developers will find they can be opportunistic.”

Louise Brooke-Smith, founder of Edgbaston planning consultancy CSJ Brooke Smith, said: “The imminent changes through the Decentralisation and Localism Bill will present a new approach to the planning system and theoretically give power to local communities.

“The critical test will be whether greater local involvement motivates and encourages the development industry to provide enough housing and commercial property for communities and businesses to thrive.”

Ian Cornock, partner in charge with consultancy King Sturge, said: “Significant incentives will remain on offer in the core office market, with rental growth unlikely. However, as occupiers choose the best space, the appetite for refurbs should return. Demand for ‘design and build’ industrial units will tick up in prime locations but secondary space will remain hard to shift.”

Simon Lloyd, right, head of industrial/logistics at advisors DTZ in Birmingham, said: “Funding for new industrial developments will continue to be a problem. This, combined with increased take-up and demand for grade A buildings, will lead to a shortage in stock, resulting in occupiers having to be flexible about location, building specifications or price. Demand from retail and waste industries will also continue.”

Martin Guest, MD at advisors CB Richard Ellis in Birmingham, said: “Conditions in the office market conditions are likely to remain challenging, with similar take-up levels as 2010, and little or no rental growth. There will be some churn at the lower end of the scale and it would not be surprising to see at least one big deal. A number of companies have been reviewing their property portfolios and 2011 could be the year when they decide to make their move.”

Jan Thompson, head of real estate services firm Jones Lang LaSalle’s Birmingham office, said: “Less hesitancy from occupiers, especially in distribution and logistics, will be the order of the day as growth plans are dusted off. Retailers will remain the dominant occupier group next year and service providers across the property market will get stronger as business and confidence improves. New development activity will remain limited and focussed on select, prime logistics locations.”

Mark Weaver, left, managing partner of consultancy Rider Levett Bucknall in Birmingham, said: “Incentives such as longer rent free periods and landlord contributions will increase although accessing finance will remain an issue.
“There have been a number of successful commercial developments by stable developers with suitable pre lets and an exit route for both developer and financier. We will see more of these.”

Richard Norgrove, property director at portfolio managers Hortons’ Estate in Birmingham, said: “Tenant demand will remain weak and rental levels in the occupier market will see little improvement, especially in city centre offices.
“Well located, out-of-town small office developments may see an increase in demand as smaller businesses are established. These still need to be competitively priced on flexible terms.”

Margaret Hopkins, marketing director of Kingswinford-based portfolio manager London and Cambridge Properties, said: “The level of interest in vacant properties has risen over recent months. It is hoped this trend will continue into 2011 as it seems businesses believe, as the economy recovers, this is their best chance to secure premises on attractive deals. The great unknown is the Government’s austerity measures which could kill off the recovery.”