Property investors still have huge appetite for Birmingham offices
INVESTOR appetite for regional office stock strengthened during the first quarter of 2015, with Birmingham the second most popular destination for investors outside of London, according to Knight Frank.
The property consultancy’s Regional Office Market Performance research showed that during the first three months of the year, total office investment volumes reached £178m in Birmingham, boosted by the sale of RBS’s Brindleyplace headquarters to German pension fund VGV for £131m.
Only Manchester recorded a higher total at £182m.
Given the weight of money targeting core regional office markets, prime yields moved down by 25 basis points across the majority of centres.
Birmingham and Manchester now command a premium over the UK’s other regional markets, with yields at 5%, closely followed by Bristol and Leeds at 5.25%.
Ashley Hudson, head of investment at Knight Frank in Birmingham, said: “Offices are forecast to be the lead performing sector in 2015, ahead of both retail and industrial.
“The Investment Property Forum (IPF) Consensus Forecasts show an average total return of 15.9% for offices driven by rental growth and an expectation of relatively strong capital value growth.
“With offices forecast to be the lead performer we expect investor demand to remain strong.
“There will be further yield compression across the regional office market, driven by the substantial weight of money and shortage of good quality stock.”
According to Knight Frank’s research, regional office occupier activity tailed off during the first quarter of the year, following an exceptionally strong 2014.
Take-up across the ten cities monitored as part of the research totalled 1.35 million sq ft in Q1, compared to 2.15 million sq ft in Q4 2014.
In Birmingham, take-up during the first quarter was circa 140,000 sq ft.
