Pictured above: Lambert Smith Hampton's Ian Kibble 

The level of commercial property activity in the West Midlands in the first three months of the year was the lowest in the country, according to new figures from national commercial property firm Lambert Smith Hampton (LSH).

But increased activity from REITs (Real Estate Investment Trusts) was seen as they returned to the market after successful recapitalisation, and industrial property take-up continues to perform strongly.

LSH's quarterly analysis of the market showed that only Wales was as sluggish as the West Midlands, although activity levels fell across the country.

The report blames the lack of prime assets and a shortage of funding - particularly bank funding - for the slowdown. Economic activity grew in the first quarter, but a shortage of available funding kept a damper on property activity.

Ian Kibble, Regional Director of the Birmingham office of LSH said, "While economic indicators, particularly in manufacturing, are improving and therefore creating increased take-up and demand, the simple fact is that prime space is very limited. In addition, the banks are reluctant to increase their exposure to property. We have to hope that this resistance to providing funding doesn't threaten the success of the Enterprise Zone programme which has to attract investment if it is to succeed."

But he added, "The good news is that new funders are entering the market and with the right advice, finance can still be found despite the reluctance of the banks. In addition, industrial property take-up is strong as evidenced by LSH's leadership of the biggest Midlands industrial deal so far this year in a £60.5 million industrial portfolio acquisition."

Commercial property investment in the West Midlands in Q1 was £132.4 million, less than 10 per cent of the 2010 full-year investment total. Nearly half of this was industrial property, with the remainder made up of retail (£54.7million) and office space (£17.5 million).

Across the UK, £8.4 billion of transactions were recorded in the first three months of the year, a 10 per cent fall from Q4 2010, but some 16 per cent up on the first quarter of last year. Increased activity from REITs was seen as they returned to the market after successful recapitalisation. Overseas investors accounted for 21 per cent of activity, while UK institutions committed £1.2 billion, a 33 per cent market share.

Distribution remained the main focus of activity in the industrial sector, accounting for 54 per cent of all activity.

Ian Kibble said, "Credit availability is going to be a key factor in sustaining the upturn during the remainder of the year. Due to the strong recovery in manufacturing and exports we expect the demand for prime industrial space to strengthen. However, vital to all this is the availability of prime space and funding. As we progress through the year our expectation is that banks and UK institutions will start to release more assets to the market." 

For more information about Lambert Smith Hampton, please visit their website here: www.lsh.co.uk