‘Rents to harden’ in commercial property sector
RENTS in Birmingham’s commercial property and office sector are expected to harden over the next 12 months as the industry stabilises post-recession.
But there is still uncertainty over rental incomes following the Emergency Budget as half the city’s office take-up is by the public sector which is under threat of large-scale cuts.
By contrast, just 3% of office space is taken by Birmingham’s banking sector.
The comments came at the Midlands Market Insight Briefing, hosted by real estate advisor CB Richard Ellis at its offices in central Birmingham.
Valuation advisor Mike Stephens told delegates: “Government’s swingeing public sector cuts cannot be replaced for some time.
“Take up is going to have to be done by somebody else. It will be interesting to see where that comes from.
“In 2009/10 prime rents were £27 per square foot, down from £32 to £33 in the 2007/08 peak. These figures will remain for this year and next year but rents should grow from 2012 through to 2015.”
Mr Stephens said there was now an increasing importance placed on sustainability and corporate responsibility.
“Sustainability of buildings and locations saw companies wanting great transport links and good facilities for staff,” he said.
“This could have a negative impact on the out-of-town sector. In our view, we don’t think there’s going to be major relocation of Government departments from London and the South East.
“In the next 12 months we think rents are going to harden and not show much growth and lease flexibility will increase.
“There’s evidence that landlords are taking a hard line in negotiations. Development standards will focus on efficiency of use.”
Delegates also heard that supply across Birmingham was reducing but demand was also tapering off although take up was strong in Q4 2009 and Q1 2010.
There was still strong sector demand from companies such as Marks and Spence and Tesco, Mr Stephens added.
CBRE’s national head of research Peter Damesick also gave guests an overview of the wider UK property market focussing on office usage and debts.
