Midlands office rental levels expected to remain static – Lambert Smith Hampton
The Midlands remains oversupplied with secondary and tertiary office property, says Lambert Smith Hampton. In its recent National Office Market Report, the firm points out that prime office space remains limited across the region as demand outstrips supply. Overall availability has crept up, however, as market activity levels have remained subdued, to the point where it is close to the market highs of 2009, LSH says.
Pressure on supply could trigger growth in rental levels for available office space in 2013, LSH says, but before then the firm only expects rental growth in Central London and parts of the South. The firm notes that prime rents in Birmingham have fallen around 15% during the current recession, but have held up better in Nottingham and Leicester. It says rental levels for non-prime space outside Birmingham have fallen in the current depressed market conditions.
LSH expects lease incentives – currently at between two and three years rent-free, on a 10-year lease – to start to reduce next year, “providing there is a general improvement in market conditions”.
Alastair McChesney, agency director in the Birmingham office of LSH, says take-up of office stock in the Midlands has fallen short of the long-term average in the past two years, but supply (mostly second-hand) has been relatively stable. He notes that the region has seen limited appetite for speculative development, and a considerable amount of vacated second-hand stock arriving on the market. Regeneration schemes have stalled as investor confidence has waned and public-sector grant support has been lacking, he adds.
Lambert Smith Hampton’s report also looks at the UK locations where there is already a below-average proportion of Grade A office stock and where it thinks developers should start to get to work now – these include Glasgow, Bristol and Cardiff. For more on this, see our blog from last week.
