Investors and property agents tell BCO conference that markets outside London are turning around
Construction and property firms have been urged to re-enter the regional office market amid signs of the market鈥檚 resurgence, at the annual British Council for Offices (BCO) conference, held in Birmingham last week.
The new-build office market outside of London has collapsed from 1.6 million sq ft of schemes developed a year on average before the financial crisis, to 500,000 sq ft a year afterwards, according to property agent Savills.
But investors and property agents told the conference the regional office market is starting to turnaround.
Mat Oakley, director of commercial research at Savills, said the regions were starting to benefit from being 鈥渃ompetitively cheap鈥� compared to the booming London market and from a 鈥渟evere under-supply of Grade A office space鈥�.
Rupert Young, development director at Nurton Developments, said in his firm鈥檚 assessment 鈥渞egional cities in general have less than two years of Grade A office supply鈥� and this needs to be replenished, and while speculative office development is still uncommon, 鈥渋t is no longer a dirty phrase鈥� in the regions.
Young said there was a 鈥渨all of cash鈥� from overseas planning to invest in the UK property market and the regions could offer 鈥渁 competitive edge鈥�.
Young added the regional office market would be 鈥渂oosted鈥� by commercial market trends including expanding new banking clients such as Tesco, Virgin and Sainsbury鈥檚, companies relocating operations from London, as Deutsche Bank has done in Birmingham, and re-shoring of operations, as Santander has done by moving operations from India to Liverpool.
Phil Irons, partner at investor Benson Elliot Capital Management, said: 鈥淚f you鈥檙e brave enough the real money is in new-build office developments [in the regions].鈥�
Sir Albert Bore, leader of Birmingham City Council, told the conference: 鈥淚f we鈥檙e not careful a shortage of office space will throttle growth [in Birmingham].鈥�
However Oakley warned the regional city markets are 鈥渟mall and illiquid鈥� and 鈥渢here is a fine line between over and under supply鈥�, while further public sector cuts could negatively impact on the office markets.
Enabling work for Birmingham and Argent鈥檚 拢450m Paradise Circus mixed-use scheme (pictured) in the city centre - which will deliver one million sq ft of office space - begins this autumn.
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