The prime central Birmingham office investment market has been dominated for the past 18 months by private UK and overseas investors and syndicated funds, according to a new report from Knight Frank.
German, Irish and Middle Eastern investors have been particularly active with prime city centre locations ? attracting a premium ? according to the property firm?s latest UK Investment Commentary for Winter 2003/04.
Ashley Hudson, associate in the commercial investment team at Knight Frank Birmingham said: ?This is largely good news for the property sector.
?Whilst cheaper borrowing made 2003 the year of the debtdriven investor, in 2004, we can expect to see the return of institutions to the market.?
He added: ?Last year, institutions found it extremely difficult to compete due to the extremely keen prices paid by debt financed investors.
?Institutions are expected to increase their allocations to property in 2004, as actuaries continue to adopt a more favourable view of the asset class.?
Perhaps one of the most high profile deals negotiated in the city was revealed at the beginning of this year when developer Frontier Estates, advised by Knight Frank Birmingham, sold Five St Philip?s Place, one of the city?s most prestigious landmark office buildings, to clients of the Bank of Ireland for #37.75 million, reflecting a net initial yield of 5.85 per cent.
The 67,373 sq ft office building, overlooking Colmore Row and St Philip?s Place in central Birmingham, is set to become the new headquarters for the Government Office for the West Midlands (GOWM) in one of the largest lettings to have been announced in the region in the last year.
Other private/overseas deals include 55 Colmore Row, sold to German fund, iii Fonds, in August 2002 for #45.5 million; Direct Line House sold to clients of Sherry Fitzgerald Capital in May 2003 for #23.14 million, and 2 Brindleyplace, sold to clients of Bank of Ireland for #30.4 million in September 2003.
The report also surmises;
l 2003 was the year of the debt driven investor. Nationally, bank lending to property rose to #97.3 billion at the end of Q3 2003, representing growth of 20.6 per cent over the past 12 months.
The rise in lending has been steep. The majority of this funding has been for the acquisition and refinancing of standing investments or for pre- let development.
l Institutions struggled to compete with debt financed investors throughout the year and across all sectors.
Net investment in property fell by #742 million during Q3 2003 and the rapidly recovering equity market led some institutions to redistribute asset weightings to benefit from the rebound in share prices, with a corresponding fall in allocations to property.
l Equities out performed total property returns in 2003, having increased by 36 per cent from its low point in March 2003. Interestingly, however, property returns have outperformed equities and gilts over three, five and ten years.
l In 2004, the attractiveness of property for the debt driven investor may begin to wane.
l Interest rates were increased by 25 basis points in February 2004 to four per cent, narrowing the gap