Rent levels for office space in the Midlands are likely to remain static for the whole of next year and beyond according to new research from national commercial property firm Lambert Smith Hampton (LSH).
LSH’s National Office Market Report predicts that it will be 2013 before rents for office space will show any growth. At that point pressure on supply could trigger rental growth. Until then, rental growth will be restricted to Central London and parts of the South.
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 the 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.
Lease incentives, which amount to between two and three years rent free on a 10 year lease, should start to reduce next year, providing there is a general improvement in 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.”