Grade A office transactions in Birmingham fell by almost half in the second quarter of the year.

According to latest DTZ Research UK Property Times office market reports, total take-up in Birmingham fell back to 111,000 sq ft in the last quarter.

With uncertainty during the election in May and in the run up to the Emergency Budget in June, tenants hesitated to commit to deals and transaction activity fell in most city centres across the UK during the period.

DTZ said that future leasing activity is likely to continue to be subdued as firms continue with efficiency plans to minimise costs. Overall, recorded annual take-up is forecast to fall back in 2010.

David Tonks, head of office agency at DTZ in Birmingham, said: “The current market does present occupiers with the opportunity to acquire high quality space on competitive, flexible terms.

“Whilst occupiers from all sectors recognise the opportunity, current evidence in the market suggests that the combined effect of the election, the Budget, the autumn spending review and general economic uncertainty has limited the scale of active demand coming to the market.

However, the underlying picture is more positive. A broad range of companies are actively considering their accommodation strategy to ensure that, where possible, the opportunity provided in the current market is capitalised upon.”

Investor sentiment in regional office markets also turned more cautious in the second quarter, and there was a notable easing of the weight of money in the market.

Some prime yields have stabilised and some have even moved out 0.25 per cent.

However, a pricing differential for anything other than 100 per cent prime has become apparent, despite the ongoing shortage of opportunities.

Concerns about the economy, post-General Election, the impact of the eurozone sovereign debt crisis and the fall in share prices over the quarter continue to dampen investor confidence.

Nick Allan, investment director at DTZ’s Birmingham office, said: “The rally of the past year or so has certainly softened in recent months, largely driven by the change in government, the austerity budget and now the holiday period.

“That said, we see the second half of the year being stable, with potentially some pressure from the institutions to spend cash allocations prior to year end.”

Martin Davis, head of UK markets research at DTZ, said the market still had much room to improve.

He said: “We expect the regional office market to continue to be subdued over the medium term.

“Demand from the public sector is set to be severely limited following the impending cuts in public expenditure. Many local private sector firms rely on the public sector, which could also have a knock on effect.

“The investment market is likely to pick up later in the year, as institutions look to spend allocations by the end of the year, thereby boosting transaction volumes.”