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Regional Divisional Director, Offices 
Lambert Smith Hampton (LSH) Ian Leather, provides his view of the forthcoming year

wantspacegotspace.co.uk - Regional Divisional Director, Offices Lambert Smith Hampton (LSH) Ian Leather, provides his view of the forthcoming yearWill 2013 be the long awaited “watershed” year that everyone connected with the UK commercial property sector has been yearning for?

Will we see economic growth and growing occupier confidence which will start to fuel greater levels of activity, especially in the regional office markets?

The recent take up figures across the regional markets are significantly down on the long term average, with Birmingham’s core office market managing just over 500,000 sq ft of deals; 25-30% down on the 10-year average.

It is difficult to predict the rate of recovery in the UK property markets and overall economy ….or not, as the case may be. 

There are clear signs that some industry sectors are performing well and have worked their way through the recession whilst others in the service industry are more aligned with our friends across the Atlantic as they peer over their own fiscal cliff!!

Without worrying about what is happening across the Atlantic, we have our own issues which will continue to hold back the UK property sector.

Over the next two years there is circa £200bn of commercial loans that will mature, where the LTV is already under pressure. Banks will want increased margins and comfort. Added to which there is pressure from the occupiers who have lease activities and want to use the opportunity to realign their lease commitment - or reap the financial benefit of the current market conditions - and it is easy to see that there is a “perfect storm” waiting to challenge the recovery.

However, despite these potential barriers to recovery there is still a lot to shout about in the Midlands.

With so little development activity there has to be a tipping point; where the continued take up of what little Grade A space remains will take us to the point where occupiers will be left with little alternative but to consider the next tier of accommodation, or consider a pre let option.

At LSH we believe that the tipping point has been passed in some regional markets but for the likes of the core Birmingham market we see this happening in mid to late 2014, which is little time at all.

This throws up two thoughts;

1.    There is a great opportunity for the existing built stock to take advantage but investors will need to ensure that their specification and quality of offer is elevated to a greater standard, meeting not only perceived institutional standards but a greater level of energy and cost efficiency for the occupier.

2.    The opportunity for occupiers to adopt a forward thinking approach and consider pre letting has never been greater with a number of schemes on the drawing board but seeking the elusive occupier.  Most developers would be willing to look at structuring deals which offer a greater degree of profit share so it is a win/win for all parties!

So to answer the question – yes, 2013 could be a watershed year.  Whilst there are challenges ahead and the debt recovery market has a long way to go there will be opportunities aplenty for investor/developer and occupier alike.

However, negotiating a “perfect storm” will require vision, the right advice, and a team approach from your crew.

Posted by The Editor (wantspacegotspace) on 18th January 2013 (updated 21/01/2013)

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