Rental levels for office space in the West Midlands are likely to remain static for the whole of next year and beyond, a new report reveals.
Research from national commercial property firm Lambert Smith Hampton suggests that office rents are unlikely to show any growth before 2013.
The LSH report says growth will be restricted to Central London and parts of the South until then, when some movement is expected in the market nationally.
The report says: “Availability levels have remained high in the Midlands, although prime office space continues to be limited and most availability is of lower grade stock.
“With the continued low level of market activity, availability has crept up and is close to the market highs of 2009.”
The LSH report also confirms fears that the region will face a shortage of Grade A office space in coming years as demand outstrips supply.
In Birmingham there is only 300,000 sq ft of space available, but both the city centre and out of town markets are oversupplied with secondary and tertiary stock.
In Nottingham the same is true, with the market being oversupplied with secondary and tertiary space.
Prime rents in Birmingham have declined by some 15 per cent during the recession, while holding up in Nottingham and Leicester. However rents for non-prime space outside Birmingham have fallen due to depressed market conditions.
Alastair McChesney, agency director in the Birmingham office of LSH, said: “The office sector in the region has undoubtedly felt the impact of difficult market conditions over the last two years.
“We’ve seen a limited appetite for speculative development, regeneration schemes stalling due to lack of investor confidence and public sector grant support, and an abundance of vacated second-hand stock.
“While take-up of office stock has fallen short of the long term average, supply has remained relatively stable, yet has been largely second-hand space.”
LSH said lease incentives should start to reduce next year if market conditions improve.