Property investment in the West Midlands in 2011 was less than half that of the previous year according to stark figures from commercial property firm Lambert Smith Hampton (LSH).
Limited bank lending, a shortage of prime space and a lack of appetite for risk all contributed to a sharp fall in commercial property investment in the region, according to LSH’s latest quarterly analysis of the market – UK Investment Transactions Q4 2011.
Property investment for the whole of 2011 was less than £800 million, compared with more than £1,600 million in 2010. The fall was spread across all asset classes with office, industrial and retail sectors all seeing reductions in investor activity.
A similar picture emerges across the country, with the exceptions of London, and to a lesser extent the South East, which have continued to attract investment, much of it from outside of the UK.
Adam Ramshaw, Associate Director in the Birmingham office of LSH said, “The problems of the Eurozone and the halting recovery in the UK economy have depressed market sentiment and in the regions, investors have been reluctant to look at anything other than prime stock or very good secondary stock. The lack of prime stock in many regional markets has had an inevitable 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.”
