Birmingham's office market is set to outperform the rest of the UK outside London in 2006, with rents forecast to reach £30 per sq ft for prime grade A office space such as Baskerville House.
The sunny forecast comes in The Lambert Smith Hampton Weather Map, which covers the UK and Ireland office, retail and industrial sectors over the next six months.
Prime office rents in Birmingham will rise by 9.1 per cent from £27.50 per sq ft, passing the £30 milestone before the end of the year.
Only office rents in London, with a predicted ten per cent growth, are expected to perform better than Birmingham, with Slough on a par.
Manchester and Glasgow - key rivals for footloose occupiers and office investments - are expected to perform less well. Zero rental growth, becalming top prime rents at £28 per sq ft, is forecast for Manchester, while Glasgow is expected to perform better with growth of 6.4 per cent taking top prime rents to £25 per sq ft.
The new forecast reinforces Birmingham's competitive position in the office market -the second city was rated 23rd in DTZ's ninth Global Office Occupancy Costs Survey, while Glasgow was 30th and Manchester unmentioned.
Ross Bendall, director and head of office agency at Lambert Smith Hampton's Birmingham office, sums up the prospects, saying: "Here, in Birmingham the outlook is very sunny, as there is little or no immediately available grade A office space, with good latent occupier demand. As a result, simple supply and demand dynamics are putting upward pressure on rents.
"Rather than a gradual rise, we are most likely to see a sudden step change in top rents this year, with Baskerville House, the only grade A space to complete in 2006, the prime candidate to achieve £30 per sq ft - the figure being quoted for its top floors. "The outlook for the national office market as a whole is bright. In 2005, prime office rents either increased or stabilised, as occupier demand steadily improved in all key markets around the UK."
In the industrial market, the LSH Weather Map shows Birmingham performing less strongly than the office market with the forecast of a rise in Birmingham prime industrial rents of 1.7 per cent from £5.75 per sq ft to £5.85 per sq ft within the next six months.
Nick Ford, director and head of industrial agency at LSH, isn't too downcast. "Sunny periods are predicted for the Birmingham industrial market," he says.
"The shortage of mid-range industrial and distribution buildings in the Midlands looks set to ease in 2006, as developers start to bring through a number of new speculative developments, although there is very little prime standing stock.
"Rising fuel costs and retailers squeezing contract prices are keeping logistics companies on the back foot and sensitive to any increase in rents. We have seen incentive levels reducing which, coupled with the new speculative stock coming on stream, will feed into modest growth in prime rents in Birmingham.
"The national expansion in supersheds of 500,000-plus sq ft is in danger of passing Birmingham and the West Midlands by, as the lack of large strategic distribution sites and rising land values in the West Midlands and distribution operators logistical criteria are pushing occupiers towards locations previously considered to be secondary in the northern-east Midlands and Staffordshire."
Birmingham continues to command some of the top retail rents in the UK, though average prime zone A rents are only set to increase by 1.5 per cent to £330 per sq ft in 2006, according to the LSH Weather Map.
LSH retail director Chris Walters says: "Since the opening of the Bullring, Birmingham city centre has become one of the UK's premier shopping destinations, attracting a number of new and exciting retailers.
"Demand for space in Bull-ring remains strong, with the latest letting to Apple rumoured to have attracted a record rent for the scheme.
"However, the addition of the Bullring's 1.2 million sq ft of retail space, has naturally had an impact on other locations in the city where we are experiencing a period of consolidation.
"This is most noticeable in Corporation Street and parts of New Street, where a number of high-profile stores have come to the market. We are likely to see an on-going rebalancing of rental values in these locations.
"The overall effect on rents for 2006 and onwards will be positive, hence the forecast for Birmingham retail in the next six months shows sunny periods, despite tougher times for some retailers.
"In the rest of the UK, as in Birmingham, occupational demand remains strong for top quality units in the best pitches.
"Demand from international retailers remains good with specific requirements for larger units in prime locations.
This should ensure a growth in rents in all locations outside the South-east in 2006."
The LSH Weather Map takes an authoritative look at factors driving change and forecasts performance over the next six months, using the consultancy's regional and local market expertise and knowledge across 27 offices in the UK and Ireland.
To get a copy, call LSH on 0121 236 2066.