Recent shifts in the regional economy can clearly be seen in the changing fortunes of the West Midlands' commercial property industry, according to the latest RICS (Royal Institution of Chartered Surveyors) commercial property survey.
Demand for office accommodation and retail space in the West Midlands showed signs of stalling during the second quarter of 2005, with chartered surveyors in the region reporting an eight per cent and six per cent fall respectively in demand from the first quarter.
Most striking of all is the significant drop in the region's industrial market, with the West Midlands showing the weakest activity across the UK - a reported 27 per cent drop in sales and lettings activity.
However, the RICS said that this may only be a temporary set back, with both the collapse of MG Rover and slowdown in consumer spending having a heavy impact on the region during this quarter.
Simon Quandrill, partner at Knight Frank and regional commercial property spokesperson for RICS West Midlands, said: "Although the figures show that demand for office space is static in the West Midlands, there is still a keen appetite for Grade A developments.
"With the last remaining new Grade A space in the city centre virtually all gone, demand on refurbished quality space is on the increase.
"Enquires are now starting to crystallize in to firm commitments, as businesses snap up the last remaining space. Quality refurbished schemes such as the 66,000 sq ft at 9 Colmore Row will help to fill the gap."
He added: "With demand continuing to outstrip supply in the city, we are starting to see rents creeping up in response to this.
"Upward rent movement has been seen on existing space, giving increased confidence to developers with planned speculative schemes in the pipeline.
"However, it is unlikely that we will witness record rents levels until the bigger schemes come on line, such as Colmore Plaza in late 2007".
Looking across the UK, overall demand for business property stalled in the second quarter with fractionally more chartered surveyors reporting a fall in new sales and lettings than a rise. However, the office market is holding up well compared to retail and industrial property, which are more exposed to the economic climate.
The RICS said that higher interest rates and a sustained slowdown in consumer spending over the past 18 months have contributed to weakness in the retail market.
Output from the manufacturing sector continued to contract in the second quarter, while previous support to industrial demand from the wholesale distribution sector waned. But expectations that interest rates are soon to fall will bolster confidence.
Meanwhile, figures from research firm Hometrack showed that house prices in England and Wales fell for the 13th straight month in July, taking annual deflation to its sharpest in at least four years.
Hometrack said its measure of average house prices based on agreed sales reported by estate agents fell 0.2 per cent from a month ago after the same monthly fall in June. Prices were down 3.74 per cent over the last 12 months, the most marked fall since Hometrack records began in 2001.