While the London commercial property market may be in robust health, until the beginning of this year the regional markets had struggled to recover. However, a new survey conducted by RICS indicates that the West Midlands is in the midst of a resurgence which could potentially see rents increase to pre-recession levels – something that is certain to put a smile on the faces of landlords and developers operating in the region.
According to the survey, the number of surveyors reporting a boost in demand for space in the first quarter of the year rose by 54 per cent; one of the strongest results to be recorded since the financial crisis bit in 2008. This marks the sixth consecutive quarterly growth recorded by RICS, with office and industrial properties particularly sought after by growing firms.
Unfortunately, one issue remaining in the way of strong recovery within the West Midland’s commercial property market is the relatively stagnant retail sector. Although it is improving gradually, the survey shows that demand remains at 34 per cent – largely unchanged since the last quarter of 2013.
Another, arguably more serious, problem is a steadily increasing drop in supply as demand continues to grow which, if left unchecked, could cause a spike in rents similar to that seen in London. This largely affects office and industrial space, with 10 per cent of surveyors participating in the survey noting a further drop in office space availability; causing expectations for rent rises to hit the highest level since before the recession.
Commercial spokesman for RICS Ian Pitt, who is also head of office at Birmingham’s Bruton Knowles property consultancy, believes rents will continue to rise sharply as office and industrial space becomes harder to find.
He says; “The results of the survey are an indication that confidence is returning to the regional commercial property market, prompting an increase in both occupier and investor activity across the office, industrial and retail sectors.
“However, the increase in activity has put a strain on supply, with Grade A office stock, particularly in Birmingham’s central core, and large industrial units across the region beginning to run low.
“As a result, we are starting to see rents creeping back up to pre-recession levels, albeit slowly.”
