Despite ‘stubbornly high vacancy rates’ and tentative demand for shops, investment sentiment towards the West Midland is at an all-time high, according to experts at Colliers International, which has this week released its annual Midsummer Retail Report.
The sector leading report showed that in 2014 there was £4.6 billion of overseas investment into UK retail property. While this was only slightly ahead of 2013, the trend for the UK on the whole this year appears to be quickening. With less than half the year gone, £2.8 billion has already been spent by foreign investors on UK retail assets.
As the Midlands anticipates the completion of one of the largest investment projects in Birmingham’s recent history – the £150m redevelopment of New Street Station and Grand Central scheme – it is evident that this forward momentum is being felt in the regions too. Aside from the Grand Central scheme, significant investment is also being ploughed into Birmingham’s wider retail offer, with a £50m redevelopment of the Mailbox, which will see Harvey Nichols almost double in size, and Selfridges investing £20m to refit its premises at the Bullring, to name just a few.
Emel Hussein, Associate Director in Colliers International’s Birmingham retail team, said: “Birmingham has had an unbelievable few months with HS2 announcing that its construction HQ will be based in the city at the end of last year and, more recently, HSBC confirmed it would be relocating its HQ from London to Arena Central. This strength of endorsement on a corporate level, coupled with the major work currently underway around New Street Station and the significant investment being ploughed into Birmingham’s wider retail offer the retail outlook for Birmingham and the West Midlands region has never been better.
Although the UK is experiencing a forward momentum in terms of retail investment on the whole, vacancy rates remain ‘stubbornly high’ across the board and rental levels have been subdued. Nationally, rental growth is up 3.1 per cent year on year if London is included. Excluding the Capital however, rents are down across the UK by 0.2 per cent.
In the West Midlands, rental values have fallen by 4.0 per cent YOY, with 15 towns reporting decreases, up from 13 in 2014. Of the 33 towns monitored in the West Midlands, 18 showed no change in rental value, including Birmingham city centre which remained stable in 2015 at £285 psf.
Emel added: “Although the numbers show some stagnation in terms of rental value in the West Midlands since this time last year, this isn’t representative of the wider market sentiment.
“The launch of Grand Central in September will bring a host of national retail and leisure names to the city region for the first time and give visitors coming into Birmingham, via the revamped New Street Station, a first impression which would rival any major European city.
“The knock on effect of this scale of investment is immeasurable, not just for Birmingham but for the region as a whole – it will create jobs, act as a catalyst for further investment locally, and have a lasting effect on the regional economy.
“Despite the positive investment picture in the region, we are still some way from seeing a return to rental growth in the West Midlands. However, given the high levels of investment in Birmingham and the completion of some high profile schemes in the next few months, we would expect to see those towns that have reported stable rental values over the last few years to continue in that vein, before ultimately reporting uplifts.
“On the other hand, those towns which have seen year on year rental decline are likely to continue to struggle over the coming years. As Birmingham continues to invest and cements its position as the dominant retailing hub for the Midlands, footfall and spend will continue to be drawn away from these suburban centres.”
The report also analyses the level of vacant units in 15 key locations across the UK to create a ‘vacancy barometer’ for the country’s retail market. It notes that the level of vacant units remain ‘stubbornly high’ at 14.7 per cent up from 13.6 per cent in October 2014. Worcester, which was one of the towns analysed in the barometer, reported 12.9 per cent vacancy, up slightly on the same period last year (11.8 per cent).