Investors eye up Birmingham property assets

The sale of Baskerville House at the back end of 2012 marks a turning point for the Birmingham property investment market, according to experts at CBRE.

The landmark listed building, which was sold to Hermes Real Estate Investment Management Limited (HREIML) for £40.475m, attracted a number of 100 per cent equity bids.

Ed Gamble, a senior director in the capital markets team at the Birmingham office of CBRE, handled the sale for administrator Deloitte. He said: “This deal illustrates a sea-change in the way investors are viewing the regional property market.

“Investors are finally waking up to the lack of office development and the absorption of Grade A office stock in Birmingham: the bottom of the occupation market is now in sight.”

According to Mr Gamble, of the investors bidding for Baskerville House, more than half had no existing assets in the city. In addition to UK funds and property companies, there were also two overseas investors, one American and one from the Middle East.

He said: “The fact we are getting newcomers to the regional property scene is also encouraging. And who said that overseas investors were focusing only on London? They’re wrong.”

One of the reasons for the wide range of interest is the gulf between London and regional office yields.
Mr Gamble said: “This is now bigger than at any time in living memory – even bigger than in 1991, the start of the last big recession, when the regional market was still very immature in terms of occupiers and investment stock.

“At that time, Birmingham had only a smattering of quality buildings. Now, we have trophy assets and coveted tenants.”

Even the fact that office take-up in Birmingham city centre in 2012 was the lowest in 15 years is not deterring interest.

“Take-up may be low, but it’s all relative: 500,000 sq ft is not to be sniffed at,” said Mr Gamble.

Baskerville House was part of the troubled Targetfollow portfolio. The Norwich-based property company collapsed in 2010; the 196,000 sq ft Grade II listed Baskerville House was put up for sale by administrator Deloitte as a result.

Mr Gamble said: “Another reason I am encouraged is had Baskerville been remarketed 4 – 5 months ago it would have failed to shift.

“Let’s not get over excited, though. Investors are not paying over the odds for assets. Sensible pricing is the order of the day.

“In addition to it’s realistic price tag, Baskerville House boasted a number of other saleable attributes. As a listed building it does not pay void rates, and, with one floor vacant it offers growth prospects. It’s recent refurbishment means there is limited capital expenditure. Not all assets will be in this shape.”

And it is not just the office market which is luring investors to the region.

CBRE recently sold Monkspath Business Park, a multi-let industrial estate in Solihull, for £18.25million.

Mr Gamble said: “The £17.85million asking price was smashed, and again the asset enjoyed significant interest from a range of buyers. The deal was concluded inside three months.”

Cornerstone Advisers secured the development, which comprises 41 units set on 22.3 acres, from Schroder Property Investment Management Limited.