Investors are piling into Birmingham's property market, with experts predicting another strong year.
That prediction comes from Jonathan Wallis, head of Jones Lang LaSalle's national office investment team in Birmingham.
The Birmingham advisor claims pole position in the office investment market, acting on 50 per cent of all 2005 office investments in Birmingham by way of value - worth £186 million of the £375 million total of transactions completed.
A bullish Mr Wallis predicts that the team is now set to build on last year's successes.
Jonathan Wallis is Head of Jones Lang LaSalle's National Office Investment Team in Birmingham, "2005 was very active for the Birmingham City Centre office investment market with £375 million of investments traded in 12 individual transactions. While this was a reduction of 25 per cent from 2004's record of £497 million in 18 transactions, it was nevertheless a strong year and reaffirms investor interest for the city.
"The highlights of the year were Morley's purchase of the Wragges building at a record net initial yield of 5.26 per cent - albeit the rent of £22.50 per sq ft was slightly reversionary - and Oppenheim's purchase of 134 Edmund Street at a net initial yield of 5.5 per cent."
Looking ahead to 2006, Birmingham investment associate director Ed Gamble says: "We see no reason why this level of investment activity will not be sustained in 2006 and think that the property companies will again be the main sellers with UK funds likely to rise up the table, to head the list of buyers.
"While we saw a yield compression of over 25 basis points last year, we expect this trend to continue. We would not be surprised if we see initial yields fall below five per cent on a core city centre building in 2006 representing further yield compression of between 25 and 50 basis points.
"This, combined with an upward revision of our rental growth forecasts from three to 3.5 per cent per annum over the next five years suggests that the Birmingham city centre office investment market will continue to go from strength to strength."
The most significant single investment transactions which took place in the Midlands market throughout the year included the acquisition of Priory and Temple Court private UK investor for £122 million (5.99 per cent net initial yield), the acquisition of 55 Colmore Row by Morley Fund Management for £58 million (5.26 per cent net initial yield), the acquisition of Centre City by Princeton Investments and Pairon Capital for £42.8 million (seven per cent net initial yield) and 134 Edmund Street, which was acquired by German fund Oppenheim for £37.5 million (5.5 per cent net initial yield).
As if to confirm the Jones Lang LaSalle forecast, Dublin-based developer Cos-grave Property Group has made its first major foray into the UK property market with the purchase of Caxtongate, a prime retail block in the heart of Birmingham, from property company Land Securities.
Cosgrave Property Group, advised by global property firm DTZ, has acquired the mixeduse scheme situated in the prime retail district bounded by New Street, Corporation Street and Cannon Street, for £80 million, representing a yield of 5.3 per cent.
The listed building comprises 130,244 sq ft of retail space let to tenants including H&M, Hobbs, Monsoon, Jigsaw, Jane Norman and Ted Baker together with 15,070 sq ft of offices let to Orange and 22 residential apartments on the upper levels.
The purchase comprises phases one and two of Land Securities' Caxtongate redevelopment; phase one of which was completed in 1997 with phase two completed in February 2000.
As well as providing advice on the acquisition of Caxton-gate, DTZ gave property management and occupier advice to Cosgrave Property Group and has also been retained to manage the property and act as sole lettings agent.
Adam Lazenbury, retail agency associate director at DTZ in Birmingham, says: "Caxtongate has a high profile in the UK's second city, occupying a prime position in Birmingham's retail district. It has a strong tenant mix and provides occupiers with a modern retail space in a listed building."
As part of DTZ's active asset management, the property firm will review and assess the property to maximise its potential to the benefit of both the landlord and tenants.
Jonathan Mountford, associate director in DTZ's property management department, says: "Our aim is to review the property and provide the best retail offer possible for Caxtongate."