Investments totalling approximately £670 million were transacted in Birmingham’s office and retail markets in 2014, according to the latest report from GVA.
The figures have been published as part of their fourth annual ‘Who Owns Central Birmingham’ report, which provides a comprehensive overview of the city’s investment market, analysing over 1.5 million sq ft of major retail and commercial space in the city centre.
Within the reporting area – which is primarily defined as the traditional inner ring road, extended slightly to the east and west – 71.4% of both commercial and retail stock is solely owned by UK investors. The remaining 28.6%, which represents 5.1 million sq ft, is either fully or partially owned by overseas groups. This is a slight change to the figures recorded for the previous year, where 70.3% was in sole UK ownership.
While this demonstrates just a 1.1% change in the quantum of space owned by overseas investors, there has been considerable churn in terms of nationality of ownership.
US-based funds have shown the greatest increase in ownership, up from 4.5% to 8.5% and bolstered by the acquisition of the Great Charles Street Estate by Dunedin – backed by US opportunity investor, Angelo Gordon – and Lonestar’s purchase of Moorfield’s 40% stake in the Brindleyplace Estate as part of a £1 billion portfolio acquisition.
The city continued to attract interest from European investors, with the most notable transaction being Cordea Savills purchase of 5 St Phillips Place for £38 million on behalf of a German Institutional client. This added to other key buildings in German Institutional ownership such as One Snow Hill and 2 St Phillips Place.
However, European investment was tempered by a decline in Irish-held assets, which dropped from 4.6% to 2.9%.
Ian Stringer, Regional Senior Director, GVA, said: “Throughout 2014, we saw a strong demand for space in the city centre, primarily from UK property institutions and developers and US and German funds. These figures are a clear indication of the desirability of Birmingham city centre for both domestic and overseas investors, buoyed by significant and ongoing occupier confidence.
“We expect this trend to continue as companies look to relocate from the increasingly competitive south east, with large-scale commercial projects such as Arena Central and Paradise helping to accommodate requirements for high quality office space.
“Birmingham’s ongoing infrastructure projects, such as the delivery of HS2 to the city in 2026, the extension to the Midland Metro tram, and the recently unveiled Snow Hill Masterplan will all go towards enhancing the desirability of this city and its position as a leading regional centre.”
Within the retail sector there has been notable activity during 2014, with key transactions including the purchase of the House of Fraser store by Legal and General (£71.5 million) and the acquisition of the Great Western Arcade by CBRE Global Investors (£15.1 million). Prime high street yields have remained stable at around 5%.
Ian Stringer said: “Birmingham is one of the UK’s top retail destinations and it will be further enhanced during 2015 with the opening of the Mailbox in April, and Grand Central in September. These schemes will continue to demonstrate the city’s ability to attract leading domestic brands, international retailers and high quality restaurant and leisure providers.”
In terms of sectorial ownership, UK institutions own the majority of stock within the city (30%), with 28.6% owned by overseas investors. Of the remainder, UK property companies make up 21.7% of stock with local Birmingham owners – including the City Council – representing 12.8%.
Jonathan Hillcox, Director, Investment, GVA, said: “During 2014 we saw a significant weight of money focus on the UK’s regional markets, driven primarily by renewed confidence.
“In terms of investment, UK institutions have been the most prominent, with M&G’s acquisition of Two Snowhill and Legal & General’s purchase of Priory & Temple House accounting for £247.5 million.
“Property companies and opportunity funds have also played a significant role in these results with Ardstone, IM Properties and Benson Elliot acquiring Victoria Square House, 55 Colmore Row and Eleven Brindleyplace respectively.
“The purchase of 103 Colmore Row by Rockspring and 2 Cornwall Street by Bruntwood are also noteworthy, with both buildings mooted for redevelopment, adding more depth to the city’s property mix.
“Interest from overseas investors has continued into 2015, and since publishing the 2014 report, we have acted on behalf of Tritax in the exchange of unconditional contracts to sell 7, 8 and 10 Brindleyplace to German Institutional investor VGV for £130 million.”
The study covers all buildings, both office and retail, within this area with the exception of those that are owned and occupied by the public sector, civic buildings, universities or other educational establishments. Developments sites with disused buildings are also discounted.