Ian Leather reviews the year ahead for commercial property in the Midlands

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Ian Leather reviews the year ahead for commercial property in the Midlands

25/01/2013

Will 2013 be the long-awaited watershed year that the UK commercial property sector has been yearning for? Will we see economic growth and growing occupier confidence start to fuel greater levels of activity – particularly in the regional office markets?

The recent take-up figures across the regional markets are significantly down on the long term average with Birmingham’s core office market managing just over 500,000 sq ft of deals; 25-30% down on the 10 year average.

There are clear signs that some industry sectors are performing well and have worked their way through the recession, whilst others in the service industry are more aligned with our friends across the Atlantic as they peer over their own fiscal cliff.

Continued barriers to recovery for UK property sector

Over the next two years there is circa £200bn of commercial loans which will mature where the loan-to-value is already under pressure. Banks will want increased margins and comfort. Added to which there is pressure from occupiers who have lease activities and want to use the opportunity to realign their lease commitment, or reap the financial benefit of the current market conditions - it is easy to see that there is a ‘perfect storm’ waiting to challenge the recovery.

Midlands occupiers forced to consider alternative options

However despite these potential barriers to recovery, there is still a lot to shout about in the Midlands. With so little development activity there has to be a tipping point; the continued take-up of what little grade A space remains will take us to the point where occupiers will be left with little alternative but to consider the next tier of accommodation, or a pre-let option.

The tipping point has passed in some regional markets but for the core Birmingham market we see this happening during 2014. This throws up two thoughts;

  • There is great opportunity for the existing built stock but investors will need to ensure that the specification and quality of offer is elevated to a greater standard; meeting not only perceived institutional standards, but a greater level of energy and cost efficiency for the occupier
  • The opportunity for occupiers to adopt a forward thinking approach and consider pre-letting has never been greater with a number of schemes on the drawing board. Most developers would be willing to look at structuring deals which offer a greater degree of profit share so it is a win win scenario for all parties

So to answer the question; yes, 2013 could be a watershed year. Whilse there are challenges ahead and the debt recovery market has a long way to go, there will be plenty of opportunities for investors, developers and occupiers alike. However negotiating a 'perfect storm' will require vision, the right advice, and a team approach from your crew!

For further information relating to this news article contact 

Contact us now

Ian Leather
Head of Office Agency (Northampton - Milton Keynes - Luton)

01604 664399

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