Investors from both home and abroad remain interested in Birmingham despite a significant downturn in the amount of deals being done - although western economies are no longer the safe havens they once were according to experts in the city.
Birmingham had held its value while London had become increasingly expensive forcing investors to look to the regions accrding to Jones Lang Lasalle’s investment director Ed Gamble.
“Volumes may be low, but prices are remaining stable and there is still a good pool of buyers keen to invest in Birmingham. Many investors predicted values were going to drift but they have held firm.”
Prime acquisitions such as The Mailbox, sold for £127.1 million to Brockton Capital, on behalf of Brockton Capital Fund II, was above the original asking price due to increased competition while the sale of One Eleven in Edmund Street on behalf of IVG to Hines also attracted several bidders. In addition to these transactions, Direct Line House in Livery Street was also recently acquired by Frankfurt-based Deka Immobilien for £22.25m.
Along with traditional funds UK, German, Malaysian and Israeli investors are also showing interest in Birmingham attracted by the reducing volume of Grade A office supply which will stimulate rental growth going forward along with the many positive infrastructure developments taking place in the city.
He said: “There is currently over £1 billion of regeneration projects on site in Birmingham along with one of the only speculative built schemes in the region, with over £100 million being invested in Two Snowhill. The New Street station project will play a crucial role in creating the right first impression for the city and along with the library and John Lewis department store will greatly improve key areas of the city centre.
“The main sticking point for most regional markets, however, is that investors are keen to buy, but not keen to sell. A flat market is being created by artificially high prices achieved in the boom years making owners hold onto their properties and income.
“Uncertainty with the Euro Zone is also making investors sit tight, and whilst markets fluctuate heavily, property is increasingly being seen as an attractive proposition.
“I feel it’s fair to say that in terms of investment in Birmingham city centre, we’re heading in the right direction. More realism on prices in the marketplace, other than for prime sites, may also mean more buildings being put up for sale and transactions beginning to flow again.”
However Knight Frank’s investment end of year research includes an “obituary” for the “safe haven” in which western economies were once viewed as safe as it gets in the investment world.
Ashley Hudson, head of Knight Frank’s Birmingham office and investment team, said: “The economic news is dark at the moment – but it was very much darker in December 2008 and yet, 12 months later yields were falling in some areas. Anyone brave enough to have predicted that then would certainly have been laughed at.
“So, although there is a growing chance that the financial markets will lose patience with the Euro area Governments and force a break-up, investors do need to put their money somewhere and will be searching for opportunities which deliver steady and relatively secure income.”
Mr Hancox added: “A lack of confidence isn’t preventing overseas investors and UK-based institutions from actively seeking opportunities and there have been a few recent examples across the regions. But in the coming 12 months, as secondary assets prove difficult to trade (and if a double-dip on values occurs, it will here), we will see owners seeking to add value through intensive management with a view to selling when pricing hardens.”
