Birmingham office market offers better investment

THE Birmingham office market appears to be ‘warming up’ while property across the UK is offering better value for investors, suggests new research.

The second city’s office offering has been upgraded from ‘cold’ to ‘warm’ between Q1 and Q2 2011, on the Fair Value Index published by DTZ, which indicates expected returns are approximately equal to those required.

Cold is defined as expected returns being below required returns with property over-priced.

Office markets in Bristol, Manchester, Leeds and Newcastle have also been upgraded from cold to warm in the report, which offers insight into the relative attractiveness of current pricing in the UK property markets.

Nick Allan, senior director in DTZ’s Birmingham investment team, said: “The change in the classification of the Birmingham office investment market from cold to warm is clearly positive news for investor confidence in the city.

“We continue to see strong demand for both prime and good secondary assets as investors seek levels of return which are commonly unachievable in the markets of London and the South East, where both yield compression and rental growth has been significant during the past 18 months or so.

“The change in classification is, of course, dependent on fluctuations in the UK’s bond market but with the continuing take-up in Birmingham’s grade A office supply and limited development pipeline, the medium-term dynamics of the Birmingham market look positive.”

According to the index, the nation’s overall property score has risen from 28 in Q1 to 50 in Q2 this year.

The rise follows two consecutive quarters of declining scores and reflects the fall in bond yields in the UK witnessed in recent months, DTZ said.