The West Midlands office market is set for a double boost in 2004, with the opening of the M6 Toll and improving economic conditions, predicts a leading Midlands' commercial property expert.
Ian McPhillips, commercial property partner at Curry & Partners, says that office rents along the course of the M6 Toll and in nearby towns have increased by up to 25 per cent in the past 12 months and are expected to continue to increase now that the new road has opened.
"The M6 Toll will have a profound, but it is merely a contained local effect on office rents in the area. What will really make difference, as far as out-of-Birmingham office rents are concerned, is the M40 and the health of the South-east's economy," says Mr McPhillips, who is based in Curry's Birmingham office.
"It has long been the case that the M40 has been the driving force for office rents along the whole length of the motorway ring around Birmingham - the M42, M6, M5 and now the M6 Toll.
"Generally the closer, and therefore the better the access, to London, the more expensive the rents have been.
"We saw Leamington and Warwick leading the way in outof- Birmingham rents, benefiting also from their proximity to Silicon Valley and the technology and media companies which, at the height of the boom, were relocating to the Midlands."
With the recession affecting technology companies, growth in this sector stopped - as did any increase in rental levels, with rents in and around Warwick and Leamington being frozen at between #16 and #17 per sq ft for the past 18 months.
"These locations continue to be only second in price to Solihull and Birmingham Business Park, which have the benefit of being closer to central Birmingham.
According to Mr McPhillips, this situation is set to change in 2004. "Increased steady growth in the FTSE 100 and improving indicators in the UK and in the US, in the general and the technology economy, lead me to believe that the next 12 months will see a return to confidence among media and technology companies and an increased take-up in out-of-town office space," he says.
"This in turn will see rents at first continue to hold steady and then slowly rise in the second half of the year.
"One of the reasons which has kept rents steady in the past 12 months, during a general lack of demand, has been the lack of space available and developers natural reluctance to build speculatively. Now, however, we are seeing a number of new schemes on the drawing board."
According to Mr McPhillips, increasing confidence in the office market will spread around Birmingham's ring, and the towns close to the M6 Toll will receive a double boost. Lichfield town centre has seen rents rise from #10 per sq ft #12.50 per sq ft in the past year for quite basic offices, with the proposed Lichfield South Wall Island building at junction five of the M6 Toll, being marketed at guide rent of #16.50 per sq ft.
The effects of the M6 Toll on office development and rents will also spread beyond its actual length to Stafford and beyond, adds Mr McPhillips.