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News - 14/02/2013

Birmingham bucks trend with £107 million office deals

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Birmingham bucked the national trend with three major office deals amounting to more than £107 million during Q4 2012.

Outside London, the city accounted for more than 10% of total regional office transactions, which fell from £1.55 billion in 2011 to £1.03 billion last year.

Offices most desirable asset in 2012

Adam Ramshaw, Regional Head of Capital Markets, said: “Offices proved to be the most desirable asset throughout 2012, which was largely due to significant volumes of deals in Central London where the total value of transactions increased from £8.43 billion in 2011 to £11.64 billion in 2012.

“In the rest of the UK office transactions are down from £1.55 billion to £1.03 billion. However, Birmingham bucked the trend and accounted for 10% of this total with just three deals alone and we expect to see more deals being done in the first half of 2013. There are currently two other buildings in the CBD under offer at a total price of around £16 million.

“Sellers and potential buyers seem to be a lot closer now on valuations and the current market represents good value and presents good opportunities for investors.”

The three major transactions in the city were:

  • Baskerville House (195,000 sq ft) sold for £40.475 million to Hermes
  • 115 Colmore Row (80,000 sq ft) sold for £32 million to CLAL Insurance
  • The Cube (113,000 sq ft) sold for £35 million to Tristan Capital

London continues to dominate

Meanwhile, investment in London accounted for more than half of the total market (£30.3 billion) in 2012 at £17.4 billion. Overall commercial property investment remained flat with a mere 1% increase on 2011’s total of £29.9 billion.

Ezra Nahome, our CEO said: “This is the first time London has recorded such a high percentage of the investment total. Throughout the year London has continued to attract investment, particularly from overseas investors in search of a safe haven.

“In fact, prime Central London offices alone accounted for almost 40% of the transactional market in 2012. If London was the top location for investment, then the office sector was the asset class of choice; more than £15 billion was invested in UK offices last year – a 24% increase in comparison to 2011.”

Retail sector struggled

Countering this, retail investment fell by 40% in 2012 in comparison with 2011. The one sub-sector of the retail market to perform strongly was the supermarkets; where over £1.1 billion of deals were recorded at a weighted average yield below 5%.

Investment in the UK industrial market also remained low throughout 2012 with a 40% drop on 2011. That aggregate figure hides the underlying trend though, which was that investment levels for standard multi-let industrial units and parks remained level, and investment volumes for distribution warehouses fell by 60%.

There was a 26% drop in investment outside London in 2012, equating to an annual decrease of £3.1 billion.

Overseas buyers were net-investors to the tune of £7.7 billion, making them the only major net-investors in UK commercial property in 2012. In response to the strong demand from overseas investors, the major UK investors were net-sellers in 2012.

Predictions for 2013

The key investment trends that emerged in 2012 will persist throughout much of 2013. Overseas investors will continue to seek trophy assets in Central London, although transaction volumes could be limited by the availability of prime assets.

Ezra explained: “The base of overseas investors seeking exposure to Central London will widen even further. For example, we know some of the Australian super-funds are looking to return to the market for the first time since the recession of 2008-09. However, an increase in activity is reliant on the debt being available to the investors.”  

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