The Birmingham office market promises to be as hot as the weather - with rents forecast to reach £30 per sq ft (PSF) for prime grade A office space, according to the latest research from commercial property consultancy Lambert Smith Hampton.
The LSH Weather Map, which provides market fore-casts for the UK and Ireland office, retail and industrial sectors in the next six months, predicts that prime office rents in Birmingham will increase by 9.1 per cent from £27.50 psf to £30 psf by the end of year.
Only office rents in Leicester and Newcastle-upon-Tyne, with a predicted growth of 13.8 per cent and ten per cent respectively, are expected to perform better than Birmingham. Key city rivals for foot-loose inward investments, such as Manchester and Glasgow, are expected to perform less well, where zero rental growth is predicted.
"There are already strong rumours that £30 psf will be achieved or exceeded on a forthcoming deal in Birmingham's central core, so we are confident that the market will see rents of £30psf for landmark buildings, such as Baskerville House, and penthouse offices in prime locations before Christmas," said John Dillon, associate director in Lambert Smith Hampton's Birmingham office agency department.
" The outlook for the national office market as a whole is bright. In the first six months of 2006 healthy take-up has been recorded in most key office markets across the UK, particularly in London and the Thames Valley, as well as in the markets along the M1 Corridor, stretching from London to Leeds. "Forecasts for the office sector as a whole show growth in average rents of 3.2 per cent in the past 12 months, compared with 0.1 per cent in 2004. Rental growth for prime prop-erties is expected to be higher. Rental growth and capital growth should help the sector to see total returns of 13 per cent in 2006," Mr Dillon added.
In the industrial market, the LSH Weather Map shows a settled outlook for Birmingham's industrial market with no increase in rents forecast in the next six months.
"We expect stable rents of £5.75psf for prime space for the remainder of 2006. But with more prime stock due to come on stream by the end of the year, we should see an increase in rental activity, leading to a growth in headline rents in early 2007," said Nick Ford, director and head of industrial agency in Lambert's Birmingham office.
"However, freehold activity in the West Midlands seems to be heating up this summer. Continuing demand for freeholds has seen the values for some new prime stock increase by more than 30 per cent to around £80psf."
Birmingham continues to command some of the top retail rents in the UK, though predictions are again for a settled period as far as rents are concerned with the fore-cast that average prime zone A rents will remain at £325psf for the rest of 2006.
Dominic Brown, associate director in the retail agency department, said: "Since the opening of the Bullring, Birmingham city centre has become one of the UK's premier shopping destinations, attracting a number of new and exciting retailers.
"However, the addition of the Bullring's 1.2 million sq ft of retail space, has naturally had an impact on other locations in the city where we are experiencing a period of consolidation, in particular Corporation Street and parts of New Street, where a number of units have come to the market.
We are likely to see an ongoing rebalancing of rental values in these locations.
"The slowdown in the consumer sector and the growth in E-tailing - last Christmas it topped £5 billion - is expected to limit rental growth in the medium term and retailers are likely to face difficult trading conditions.
"Nationally our forecasts indicate average rents increasing by three per cent on an annualised basis over the medium term. Growth is expected to peak this year ."