Sales of prime Birmingham office stock are on target to exceed 2014 levels, according to Knight Frank’s ‘Regional Offices Occupier and Investment’ market report.
The total volume of investment activity reached £248m in the first half of 2015, slightly below levels achieved at the same time last year but half way to the 2014 £500m+ annual total, the highest since the 2007 crash.
The third quarter is already off to a good start, following L&G’s acquisition of 1 Colmore Square, Colmore Plaza, The Cube and Rutland House all being under offer.
Ashley Hudson, head of investment at Knight Frank in Birmingham, said: “It is encouraging to see that the momentum from 2014 continues. It looks like last year will not be a one-off, with investor appetite for Birmingham offices continuing unabated.”
Investment acquisitions in the city in H1 2015 was boosted by the sale of 7, 8 and 10 Brindleyplace, which accounted for £131m of the total.
Outside London, Birmingham, Bristol and Manchester have all had strong starts to the year. Between them they account for half of total investment turnover in the regions.
With regard to yields, Birmingham and Manchester have retained their premium over the UK’s other core markets at five per cent, coming in 0.25 basis points in the last six months.
Mr Hudson said: “Birmingham’s central office core is a top target for investors. There is intense competition for assets which come to market.”
Knight Frank has been involved in four major deals in the business district in the last six months, including the recent £87.3m acquisition of 1 Colmore Square, the House of Fraser building (£73.15m) and 43 Temple Row (£14.5m). The firm also advised Real Estate Investors on the sale of 85-89 Colmore Row (£7.8m) to Fidelity.
In the first three deals, Knight Frank advised purchaser Legal & General, with two of transactions were completely off market.
Mr Hudson said: “Although prime occupied properties remain a target, purchasers are also looking for assets where they can add value through redevelopment or active management strategies. Investors are really buying in to the positive occupational dynamic.
“The House of Fraser building is in need of some TLC but by acquiring the neighbouring 43 Temple Row, let to Lloyds TSB and serviced office operator Regus, L&G has now amassed a significant super prime city centre site with significant redevelopment potential.”
Early this year, Birmingham was named “the UK’s most investable city” in a European survey undertaken by the Urban Land Institute and PWC.
Mr Hudson said: “We are certainly living up to that claim. There is still value to be had here compared to London, and the high profile infrastructure improvements are adding to the draw and keeping Birmingham in firm focus.”