Savills West Midlands Property Conference held on 25 August 2010 addressed ‘Embracing change in the development market’. It reported that the commercial market needs to accept a pricing shift in order for development to return. Meanwhile upcoming changes in the planning system are generating some degree of development uncertainty.
According to Savills, market evidence shows that GDP growth will occur in the Midlands albeit at a slower rate than in some other regions. Looking forward, the firm suggested the record low commercial development completions points to upward pressure on rents once occupational demand returns next year and Birmingham City Centre office may see rents re-break the £30 per sq ft mark in 2012. Savills states however there remains a mismatch in buyer and seller expectations when buying sites, this gap must closed to kick-start activity.
In the residential markets, Savills anticipates price falls in the last quarter of 2010 and into 2011 before sustained recovery from 2012 onwards. It reported that access to affordable debt finance for first time buyers continues to be a limiting factor, with levels of transactions expected to remain below peak levels for the next six years at least. With development finance and viability still major issues for developers, the challenge will be in getting the most value from sites, both through land development and building stock which appeals to a wider range of potential occupiers.
Barry Allen, head of the Birmingham office, comments: “Commercial development in the West Midlands market will be demand driven and substantially more reliant on equity rather then debt. Opportunities may well be reliant on a re-pricing of the market. We can expect to see more opportunities in the future as banks restructure their portfolios.”
Richard Rees, head of National Development, comments: “As with the commercial market, fundamentally the house building industry is changing. Construction companies will remain the key player in the end product but the process of delivering land through planning will now include funds and investors working alongside developers.”
The event, held in association with St. Modwen at its Longbridge Innovation Centre, was attended by over 100 Savills clients and associates. Other speakers included Mike Murray from St Modwen and directors from Savills planning, development and research teams who discussed issues including political uncertainty surround planning, the increase in housing prices, and the long-term demand for commercial and residential development.