Midlands Office Market to See Recovery Only By 2011

Birmingham’s office market, like others across the UK, is currently in the grip of a prolonged slump. Things are not likely to look up just yet, as BNP Paribas’ report on the West Midlands real estate market indicates rentals will continue their downward trend for some more time, until 2011. Stability will reach the market in that year, and a steady rise is expected thereafter. Retail rentals are likely to follow the same pattern more or less, says the report.

Rental falls in West Midlands will be the heaviest with a predicted fall of 6.8% by the end of 2009 and 4.5% in 2010. After stabilizing in 2011, the rates should see an upturn of about 5% and 7% in the following two years.

Falls in rental income will also lead to a fall in the real estate valuations for the region, with Paribas predicting an overall decline of 15%. West Midlands will see an average drop of 10.9% for office space rentals in 2009. The corresponding figures for retail and industrial markets are 10.8% and 10.5% respectively. The turnaround will start in 2010, with the rates for retail and office desk space seeing a jump of 5% and 9.5% respectively.

Wit the decline in property valuations, a number of buyers will be looking around for bargains, claims Keith Steventon, head of research at BNP Paribas. The site for these buyouts is likely to be the area of Central London. His colleague David Allen however disagrees, claiming that since institutions will not be able to replace easily what they sell, the level of sales is likely to be low.