October 1st, 2009
The impending stall in the Birmingham office market has created ripples in the entire real estate sector. According to BNP Paribas, the rents are destined to fall for a continuous period of two years from now, before finally stabilizing somewhere around the end of the second year. They will become quite stabilized by 2011 and witness an upward trend after that. The situation is going to be the same for retail rentals.
With an estimated decline of 6.8% in the current year and 4.5% in the following year, West Midlands is predicted to be the worst hit of all areas. However, there is also the likelihood of an increase in rents in 2011 by 5%, to be followed by an increase of 7% in the year after that.
The rental falls will also reflect upon capital values, with predictions of a decline of around 10.9% in the capital values in West Midlands and an overall decline of 15% across the industry for the year 2009. Though the office space sector and the retail market will see a rise of 9.5% and 5% in 2010, the slump in 2009 for the retail and industrial markets will be as high as 10.8% and 10.5% respectively.
On one hand, David Allen of BNP Paribas has suggested that due to troubles faced in replacement of assets, institutions are quite reluctant to go for a sale. While on the other hand, Keith Steventon, head of research at BNP Paribas, has said that the drop is more likely to allure equity investors who are especially interested in the desk space London market.
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