The West Midlands property market will begin to ‘bounce back’ from 2010 according to one of the city’s leading agencies – although the region may still be in for a much tougher downturn than expected.

Speaking at a recent seminar, Atisreal’s Keith Steventon predicted a probable upturn next year but added a significant caveat.

“These forecasts have a significant downside risk: the economy could be much more damaged, with rents falling further and taking longer to recover,” he said. “In addition to this the investment market could remain frozen for longer, partly because of poor rental performance, partly because debt remains difficult to obtain, partly because the risk premium remains at historically high levels for longer and lastly from forced disposals pushing prices down.”

According to Atisreal, the West Midlands market looks set to see capital growth continue to fall across all sectors in 2009 with industrial values experiencing the biggest decrease of 13 per cent while retail and offices will fall 9.1 per cent and 7.6 per cent, respectively.

Next year will witness a return to positive capital growth that will continue to improve into 2011; for retail properties this translates to a 4.5 per cent increase in 2010 and 12 per cent in 2011; offices are predicted to reach 4 per cent in 2010 and 11.8 per cent in 2011 and industrial will experience a growth to 2.6 per cent in 2010 and then 12.8 per cent in 2011.

Mr Steventon said: “We believe by 2012 we could see a significant improvement in capital values, leading to very high total returns as the market comes back. The return to growth is encouraging, but it will not be a miracle return to the boom years.”

Positive rental growth in the West Midlands will not be achieved across all sectors until 2012 with Atisreal predicting the worst falls will occur this year; rental growth across the industrial and retail markets will drop by 7 per cent with offices seeing a fall of 3.4 per cent.

This will begin to relatively improve throughout 2010, 2011 and into 2012 with retail rental growth falling by 3.1 per cent in 2010 before returning to positive growth in 2011 (3.4 per cent) and 2012 (2.2 per cent). In the industrial market 2010 will see a fall of 3.2 per cent before recovery begins in 2011 with a growth of 1.4 per cent and continues into 2012 (2.1 per cent)

Offices will take the longest time to improve with a fall in rental growth of 1.9 per cent estimated for 2010 and a further fall of 2.2 per cent for 2011 with the sector looking as though it will progress in 2012 when rental growth will reach 2.6 per cent.

Tim Suffield, head of Atisreal’s Birmingham office, added: “While the outlook for 2009 is somewhat difficult there is some hope in the fact the West Midlands has sustained less damage than the rest of the UK and here is some justifiable prospect of improvement starting in 2010. It is also fair to say that property is increasingly looking well priced against other asset classes and this will hopefully lead to greater transactional activity in 2009.”