Birmingham’s commercial property sector has reacted with caution to the Chancellor’s announcement although there was a feeling that possible civic consolidation could be a welcome boost.

David Tonks, head of office agency at DTZ in Birmingham, said the announcement offered few real surprises.

“The identity of quangos to be disbanded was released sometime ago and detail surrounding the space to be released to the market is yet to be confirmed.

“The average 19 per cent four year cut in department budgets will drive further consolidation and clustering around existing centres in the medium-term,” he said. “The trend towards fewer larger public sector offices combined with the continued investment in the city’s transport infrastructure could yet benefit the Birmingham city centre office market in the medium-term.”

Stephen Hollowood, executive director at GVA Grimley’s Birmingham office, added: “This announcement will certainly put the focus upon councils having to make better use of their assets to reduce costs and dispose of surplus assets.

“However, this will also create new opportunities for their surplus estate to be used more efficiently to pump prime development projects, by helping to de-risk important schemes, a vital benefit in a depressed property market.”

However, Mike Froom, head of property and construction at KPMG in the Midlands, offered a more cautionary line: “We are already seeing government property leases that are up for renewal being terminated and expect to see a sizeable amount of ex-government property coming on to the market over the next few years.

“This stock is hitting the market when there is already very poor occupational demand, with the secondary and tertiary markets in intensive care. Further boosting the supply of regional commercial properties can only widen the yield gap between prime and secondary stocks.

“This could prove to be a tipping point for the secondary property market, which is already fragile, particularly outside London where the market has struggled to recover from the credit crisis. Unfortunately the large volume of cuts is likely to hit properties outside London as this is where many administrative functions of government are based.”

Jan Thompson, head of Jones Lang LaSalle’s Birmingham office, believes that a commitment to tax incremental finance was a positive sign for the city.

He said: “The continuing devolution in power from central through to local government is good news; providing that local authorities listen carefully to their electorate and key stakeholders.

“With the commitment to Birmingham’s Big City Plan, the revitalising of the city is still dependent on the major developments envisaged in the Plan.

“The government’s confirmation of TIF which will allow local authorities to fund key projects, comes at a time when development by private companies remains severely constrained.  TIF could significantly help future development across Birmingham and the West Midlands, which still needs to be delivered to encourage inward investment into the city.”

Andrew Rowson, partner at Birmingham-based chartered surveyors Johnson Fellows, feared the worst for the sector.

He said: “The long awaited but feared government cuts could have severe repercussions on surveying businesses.

“The property market is already suffering from a lack of confidence and there are no signs of recovery due to lending restrictions by banks. Professional landlord and tenant instructions are reducing where the private sector is taking more work back in-house and the public sector will soon follow suit.”

However, Martin Baxter, director at Shaylor Group, was more upbeat. “The cuts to transport and infrastructure have not been as bad as feared,” he said.

“We have had most of the bad news on reductions in capital spending before today and whilst most departments have had cuts imposed the need to maintain and repair government buildings and properties of all kinds remains.”