There are new concerns over the commercial property market in the UK, as two of the UK’s biggest property companies have provided fresh warnings about the health of the economy after reporting that business demand for new commercial space remains fragile.
The industrial property company, Segro, said its vacancy rate increased by 0.1 per cent in the first quarter of 2011. Segro believe London and the South East are ‘resilient’, but the rest of the UK regions are suffering due to ‘more challenging economic conditions.’
Hammerson, whose portfolio includes the Bullring shopping centre in Birmingham, also carry a grim message. Hammerson said consumer spending in its centres had been impacted by austerity measures introduced this year. They reported that the rate of occupancy in their commercial properties had fallen during the first quarter and is below the target rate. ‘
The Birmingham commercial property market is one of the UK regions which has performed poorly during the first quarter of 2011, with commercial property activity dropping to the lowest level in the UK during the first three months of this year. According to figures from Birmingham property firm Lambert Smith Hampton, ‘Investment in commercial property in the region in the first quarter was £132.4m, equaling less than 10 per cent of the 2010 full-year investment total.’
It is believed that complications with funding are the main cause of the slow down witnessed in Birmingham. However, Ian Kibble, West Midlands regional director, of Lambert Smith Hampton, remains positive. ‘ We have to hope that this resistance to providing funding doesn’t threaten the success of the enterprise zone programme which has to attract investment if it is to succeed…The good news is that new funders are entering the market and with the right advice, finance can still be found despite the reluctance of the banks. In addition, industrial property take-up is strong as evidenced by Lambert Smith Hampton’s leadership of the biggest Midlands industrial deal so far this year in a £60.5m industrial portfolio acquisition.’
Let us hope Mr Kibble is correct with his positive predictions. As, if the commercial property market in Birmingham, Britain’s second city, is struggling, then the rest of the UK regions are likely to be in for a torrid time also.
