Pictured above: Richard Goodall
Britain's regional office markets continue to be a happy hunting
ground for international real estate investors - and Birmingham is
on course to top the 2010 deal table.
King Sturge's national research team analysed the city centre
markets in the key regional centres of Birmingham, Bristol,
Edinburgh, Glasgow, Leeds and Manchester, and the largest second
tier locations, Cardiff, Liverpool, Newcastle, Nottingham and
Sheffield.
Richard Goodall, the agents' Birmingham-based head of
investment, says the findings were even more positive than he had
expected.
"We were well aware that activity in the regional markets had
risen significantly, but to see the investment total for prime
regional office space up from £438 million in the first-half
of 2009, to £714 million at the same stage this year, was
something of a surprise," he admitted.
"The first-half figure was also up by a solid 11% on the second
half of 2009, so it was pleasing to see that the upward momentum
was being maintained, and the yield levels we noted towards the end
of the year have also held steady into 2010 largely due to the
shortage of suitable stock at the prime end and the continued
appetite of investors for such opportunities."
However, there did appear to be a flight to quality in the
regions, as the total first-half investment for the second tier
locations crashed by more than 60%, compared to the second half of
2009.
The research also suggested that continued volatility in the
global equity and bond markets had made prime office assets a key
target for managers at UK pension funds, as they accounted for 62%
of the transactions.
Richard's colleagues at King Sturge's Manchester office were
celebrating as summer arrived, as they advised on the city's
largest-ever office investment deal, Aerium's £182.5 million
acquisition of 3 Hardman St, from Allied London.
However, July saw Birmingham move to the top of the 2010 deal
table, after private equity investor Moorfield teamed up with one
of the world's largest real estate organisations, Hines Global
REIT, to acquire 5 office buildings at Brindleyplace for
c£195m - representing a net initial yield (NIY) of 7.3%.
The transaction involved five office buildings, a Costa Coffee
outlet, the Ikon Gallery and the Crescent Theatre, but Richard says
negotiations lasted just three months, because Hines had been
eyeing the location for several years, and was also impressed by
Argent's asset management.
The research also highlighted two earlier deals in the city;
Aviva Investors' purchase of Rutland House, from Seven Capital, for
£27m, a NIY of 6.09%, and the £29m acquisition of 2 St
Philips Place by the investment arm of SEB Asset Management, a NIY
of 5.85%.
The latter building is let to RBS until 2022 with a tenants
break in March 2018.
"As to prospects for the wider office market outside London, the
major influence on the next phase of deal activity will surely be
the scale and location of the public sector cuts, about which we
should hear more in October's strategic spending review."