Investment volumes and occupier demand both fell in 2011 and the trend is set to continue until at least the summer according to new research.
Despite the tough economic conditions, Birmingham did see prime rents hold firm with headline rent remaining at £27.50 per sq ft although some new space saw rents drop to £20-£25 per sq ft according to research from Drivers Jonas Deloitte.
Anthony Duggan, head of research at the company, said: “Despite the weak market conditions, investment volumes and rental levels in the UK’s key cities remained resilient. Central London continued to attract foreign investors, regarding London prime office buildings as safe assets. The regional markets have seen an increase in interest from overseas investors, and Birmingham is no exception.
“Across the UK, leasing activity was low, yet the best space in Birmingham and other key cities has continued to let. Coupled with the lack of development, we expect to see a further squeeze on available Grade A space. Developers will remain tentative on new speculative starts resulting in upward pressure applied to prime rents towards the end of the year in most markets, with a few exceptions.”
The report reinforces previous predictions that the London market is considerably more buoyant than the rest of the UK, although significant transactions in all cities have buoyed the take-up levels. Prime yields hardened in most major markets, although yields moved out in Birmingham and Leeds and in London’s West End they remained static.