Back to school and the office
and feeling positive
134 Edmund Street
Against the continued backdrop of sensitive nervousness as to the immediate future, The Birmingham and UK Cities markets are emerging, and not without a little gusto. Many investors have raised funds and are keen to gain access to these markets and whilst there is no distress currently, there is certainly an opportunity to compete in a less crowded field.
Prime and income deals are attracting both overseas and institutional investors, however most of the demand is for core plus and value add in core locations. Investors remain committed to the occupational market as do Knight Frank, with any pause in activity being just that; a pause for a defined period of time.
One Colmore Square was the standout deal for Q3, with Legal & General exchanging contracts to sell to Oval Real Estate for £87m reflecting a NIY of 6.20%. There were underbidders and strong competitive tension. Latterly, The BMO owned 158 & 170 Edmund Street was quietly marketed at £10.750m, reflecting 6.00% and again with competition, this has been placed under offer to Adapt Real estate at just off asking. Otherwise, 55 Colmore Row is still under offer to Union and as of drafting, was close to exchange.
Meanwhile, Knight Frank has launched its second major Core Office of the year with 134 Edmund Street, on behalf of Patrizia. The property is being marketed at £32.45m reflecting a NIY of 6.00%. Initial market reaction is positive with institutional and private equity investors competing with overseas buyers. This will be another interesting bellwether for the market.
Elsewhere, and around UK Cities, there is activity in almost all quarters with a number of transactions completed, exchanged or in the market as summarised in the table below:
Key Regional Capital Market Transactions
Whilst positive, we are not naively so. There remains great uncertainty and of course Birmingham, Solihull and Sandwell are under tighter restrictions. However, even as the government is considering new national measures, there is an underlying confidence from investors and developers that the market will return and it will. Occupational requirements change and working practises may differ, but as a place to do business, the office and therefore the city centre will be as important as it ever has been. The roads and coffee shops are busier and Birmingham is slowly getting back to business.
Knight Frank Comment
On March 23 when we were all sent home, the outlook was bleak. No one had worked at home permanently before, let alone entire businesses and organisations. How would businesses operate, would anything at all happen? Of course, businesses did indeed operate, and deals did happen, the IT held up and we adapted to working from home. However, we do need the office, every individual and organisation has built up intellectual and social capital that allows it to do business and by staying at home, permanently, this is slowly eroded. We also cannot bring through new talent in the same way and without the office, many organisations will have a limited life span.
The playing field has however changed, moving forward we will work dynamically and geographically where it is best to complete the task. Despite all that, we will still need the office, at the very least for the social and intellectual capital it provides. Investors are aware of this and remain committed to core locations and this is evidenced by the many deals being actively pursued around the country.
One Colmore Square