Property investment in the East Midlands in 2011 bucked the national trend and showed an increase over the previous year according to the latest figures from commercial property firm Lambert Smith Hampton (LSH).
A number of large warehouse and industrial unit transactions and a higher than usual volume of shopping centre deals resulted in higher investment totals than last year, according to LSH’s quarterly analysis of the market – UK Investment Transactions.
The East Midlands outperformed the West Midlands, which saw a sharp fall in activity. Only London and the East Midlands, and to a lesser extent, the South East saw property investment increase.
Property investment in the East Midlands for the whole of 2011 in the East Midlands was £870 million, compared with £804 million in 2010. Industrial property showed the sharpest increase – from £214 million to £266 million.
Investment in the West Midlands for 2011 was less than £800 million, compared with more than £1,600 million in 2010. The fall was spread across all asset classes.
But property experts at LSH have warned that limited bank lending, a shortage of prime space and a lack of appetite for risk could make the improved performance in the East Midlands difficult to sustain through 2012.
Adam Ramshaw, Associate Director in the Investment team at LSH said, “The problems of the Eurozone and the halting recovery in the UK economy have depressed market sentiment in most of the regions of the UK, so it is encouraging to see an improved performance in the East Midlands. However, the lack of prime stock continues to have a negative effect on investment. Where prime space has come to the market it has generally found a ready buyer.”
He added, “The availability of debt continues to be an issue for the property market. New rules on liquidity, an aversion to property risk and deleveraging mean that this is likely to continue to be a problem throughout 2012. Some European banks have already pulled out of the property debt market altogether and others may join them as they seek to increase the amount of cash on their balance sheets. Lending parameters employed by banks remain tight, and while it is certainly possible to borrow money from the banks, it remains a difficult prospect.”
He added, “Some new lenders are entering the market and looking to increase their exposure to the property sector, in particular insurance companies who look more likely to lend on property rather than directly invest in it as a result of Solvency II rules. However, insurance companies and other equity-rich lenders are unlikely to be able to make up the shortfall caused by the banks’ reluctance to lend.”
