2017 could see a boost to speculative development of West Midlands’ industrial property as investors start to build rather than buy, according to Birmingham real estate asset management specialist Tim Matthews.
“There is a shortage of industrial property in the region with manufacturers and retailers continuing to invest and acquire premises post-Referendum. This is driving up rents from the current £6.50 – £6.75 psf to a predicted record £7+ psf in 2017,” says Mr Matthews who is Chief Executive of Blue Marble Asset Management which buys, sells and manages investment properties for clients and presently has more than £60 million of property assets under management.
“Industrial property is the darling of the investment market, proving to be the most resilient asset class in 2016 (nationally delivering a total return of 8.4% in the 12 months to 30 September 2016), and this is forecast to continue in 2017,” explains Mr Matthews.
“Record low interest rates mean that more investors than ever are looking to acquire commercial property, as their cash is losing value, while investors who already hold property investments are not selling as they cannot find a better return elsewhere.
“As a result the very few industrial properties which come to the market are highly contested, with a focus on yields, rather than long term capital value, driving up prices and in turn reducing yields,” says Mr Matthews.
“The only way ahead for West Midlands’ commercial property investors if they want to keep investing and receive a good rate of return in 2017 is to develop their own investment opportunities.”
With the most of the major developers focusing on the very large sheds, (100,000 sq ft +), Mr Matthews believes there is a gap in the market for investors who can self-fund the acquisition of land and construction costs to develop industrial units to meet the need for manufacturers for smaller units (up to 50,000 sq ft), dependent on the location.
“There are yields of 9 – 10% to be made through self-development, as opposed to 6% and falling via an acquisition, if a property is available to buy,” says Mr Matthews.
“However, there is little or no finance available for speculative developments until they are built and let, so investors and property companies will have to rely on their own funds to achieve this, and it’s an investment route which requires a great deal of expert advice and is, by its nature, higher up the risk curve compared to purchasing a standing investment.”
Blue Marble Asset Management has already advised a number of clients on developing their own investments. For client Axten Properties LLP it speculatively developed 35,000 sq ft of industrial space on a 2.4 acre site at Caxton Business Park in Bristol, and has recently acquired land for a client for the development of a small industrial unit in Nottinghamshire.
Based in Birmingham’s Colmore Business District, Blue Marble Asset Management is a real estate asset management specialist which presently has more than £60 million of property assets under management. It works for a select range of clients including investment businesses, high net worth individuals, trusts and family offices. Its business is based on taking a holistic view of each of its property investments.
