Pictured: Ian Kibble

Rent levels for prime office space in Birmingham city centre have tumbled by nearly 20 per cent in the last four years, according to new research from national commercial property firm Lambert Smith Hampton (LSH).

LSH's latest Midlands Office Market Report reveals that rents for prime city centre office space have fallen to around £27.50 per sq ft. In 2007 rent levels averaged more than £32.50 a sq ft.

Rent levels for prime space outside the city centre have also fallen to an average of £19.50 per sq ft, which is 13 per cent down on their 2007 peak. The figures for Birmingham - which are forecast to stabilise - are in contrast to rent levels across the East Midlands, with Leicester, Nottingham and Northampton all showing rent stability, or even slight increases.

The LSH report also confirms fears that the city will face a shortage of Grade A office space in the coming years as demand outstrips supply. Although take-up has decreased slightly over the last year, supply is unlikely to be able to keep up, with very little new development in the pipeline. The result will be higher demand for good quality second-hand space, a trend which is already developing.

Ian Kibble, Regional Director of the Birmingham office of LSH said, "The office sector in the region has undoubtedly felt the impact of difficult market conditions over the last two years.  We've seen a limited appetite for speculative development, regeneration schemes stalling due to lack of investor confidence and public sector grant support, and an abundance of vacated second-hand stock. While take-up of office stock has fallen short of the long term average across the region, supply has remained relatively stable, yet has been largely second-hand space. 

"We have witnessed a steady take-up of Grade A space which has in turn depleted limited stock, fuelling fears of a looming supply crisis and a two-tier market." 

But he added, "The good news is that Enterprise Zone status for the city centre may result in much-needed investment, and could re-start stalled schemes. In addition, while banks are keen to reduce their exposure to commercial property, new funders are entering the market and with the right advice, finance can still be found despite the reluctance of the banks to lend.