Brum’s inward investment trent has momentum: Knight Frank

Birmingham’s path of “transformational regeneration” will ensure the city continues to attract new inward investment into the city.

The claim is made in Knight Frank’s newly published ‘2017 UK Regional Cities: Office Market Review’.

Ashley Hudson, head of the Birmingham office and capital markets team at Knight Frank, said:

“Recent public and private investment in new infrastructure and amenities recognise the need to offer a lifestyle that attracts both employers and their staff.

“HSBC and HS2 are evidence of the success of this strategy. Going forward I’m confident that more inward investors will follow in their steps: this trend has momentum.”

Despite a downturn of 50 per cent in commercial property investment in the city’s office market last year, experts at the firm believe 2017 will be a strong year for both occupation and investment activity.

Ashley said:

“Investment activity was subdued in the second half of 2016, as investors absorbed the aftershocks of Brexit. What’s more, 2015 – a record year – was always going to be a tough act to follow.“But in the first two months of 2017 the sale of Brindleyplace, One Eleven Edmund Street and 2 St Phillips Place indicate that we’re back to business as usual, with a range of investors – from UK funds, to private equity houses and overseas buyers – vying for our stock.”

While investment sales of £395m in 2016 were half those of 2015, they were nevertheless on par with the ten-year average.

What’s more, the £200m forward funding of Three Snowhill by M&G Real Estate was the largest investment transaction of any regional city during 2016. The Canadian Pension Plan Investment Board taking a 50 per cent stake in the first phase of Paradise for £75m is another significant deal for Birmingham.

Prime yields in the city have moved out by 25 basis points to 5.25 per cent. These are now 75 basis points above the market peak of 4.50 per cent recorded at the peak of the market in 2007.

The report also anticipates an active occupational market in the coming year.
The Government Property Unit (GPU) is expected to announce a 240,000 sq ft pre-let at Arena Central. High Speed 2 now has the green light, which will lead to an increase in engineering firms moving to be in the proximity of the new HS2 HQ at Two Snowhill.

Again, although take-up in 2016 was down on the previous year, it was consistent with the long-term average.

Levels of Grade A stock are now at an historic low – just 127,000 sq ft was available at the close of 2016, sixty per cent below the long-term average.

Encouragingly, however, there is new stock is in the pipeline: more than 700,000 sq ft is due to be delivered by year-end 2018, of which 550,000 sq ft is speculative.

Prime rents are now £32,50 per sq ft but are predicted to reach £33.50 by the end of the year.

Jamie Philips, a partner and head of the offices team at Knight Frank in Birmingham, said:

“Birmingham is the only regional city where headline rents are not back at their pre-recession level. For inward investors the city is really good value.”

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