Investment across the regions rose to £714m in H1 2010 from £438m in H1 2009, with Birmingham ahead of Bristol, Edinburgh, Glasgow, Leeds and Manchester. Key deals in Birmingham included the purchase of Rutland House by Aviva Investors for £27m from Seven Capital, and the £29m acquisition of 2 St Philip’s Place by the investment arm of SEB Asset Management.

The largest Birmingham deal by far in H1 2009 was the Brindleyplace transaction, when Moorfield and Hines combined to acquire five prime office buildings in the complex for £195m.

PS this week Giles Barrie has written in Property Week that the property industry still resembles a stag party. He says that few women “understand the variety, challenges and characters that abound in the world of real estate” – so send NovaLoca your best examples at info@novaloca.com and we might just be able to provide those young jobseekers with some entertaining reasons to join the property industry…

The BPF/IPD Annual Lease Review for 2009/2010 – the 13th edition – analysed 91,000 tenancies and shows that average lease lengths were at their shortest ever this year, falling to just five years, from 5.9 years in 2008/09. Small businesses are increasingly signing shorter deals, the BPF says, with 81% of them on leases of five years or fewer – and therefore unlikely to face a rent review. Only 3% of small businesses are on leases of more than 10 years.

The review also shows that 2009/2010 was a significant year for rent-free periods and break clauses, amid the poor economic conditions. The BPF adds, however, that the trend towards shorter leases has been underway for more than 10 years now, “also illustrating significant long-term change in the commercial property market and our economy”.

Back in the early 1990s most leases were typically for 20 or 25 years and often contained upward-only rent reviews. By sector, lease lengths in 2009/2010 were on average 5.4 years for retail premises, 4.7 years for office space and 4.0 years for industrial property – all three have come down substantially over the past year.

Liz Peace, chief executive of the BPF, said: “For small businesses, shorter leases are probably a good thing, with the pace of business change so fast these days it makes little sense for most small and medium sized businesses (SMEs) to tie themselves into the obligations of a long lease. Shorter leases have undoubtedly meant fewer businesses found themselves in trouble during the recession and therefore were able to survive it.”

“It is also important, however, that the property market is delivering variety. Long leases still play a crucial part in the funding of development of commercial property, even more so at this time when access to loan finance is severely rationed. The income certainty that a long lease with an upward-only rent review provides is often what funds a major retail or office development, or regeneration scheme. Some larger businesses still want a long-term commitment to a building and if the lease is long they are likely to get a corker of a deal.”

Chairman James Hambro said the group expected opportunities for capital growth to be limited, given the current economic outlook. The group would “focus on generating a high income surplus from our assets while continuing to acquire assets capable of significant capital growth once the markets recover,” he added.

Hambro said the markets in all countries in which Hansteen operates remained “very tough” but added that occupancy had broadly stabilised throughout the portfolio and noted signs of increasing occupier confidence in Germany in particular.

C&W’s research includes shops held by retailers that are in administration, which accounted for 1.4% of the total stores surveyed. Its analysis covered the key retail streets of the UK’s main town and city centres – not including out-of-town shopping centres, factory outlet centres or retail parks. The group says that while caution persists, there has been a marginal improvement in retail market sentiment over the past six months, which appears to have filtered through to retail availability levels. “Stronger operators are capitalising on previous failures and expanding their market share,” C&W says. It thinks the worst of the “shake-out” among retailers as a result of the economic downturn is now over.

Looking at the retail centres individually, the lowest levels of available retail space at the start of August were in Central London (5.1%) and the North (7.7%). Outer London has the highest level of availability (17.4%), followed by the Midlands (12.1%) and Scotland (11.0%).

John Strachan, head of retail at Cushman & Wakefield, said: “The recent decline in retail availability, whilst marginal, is encouraging and we remain cautiously optimistic that the overall level of availability will continue to edge downwards in the coming months. However, it is clear that retailer demand and therefore availability will differ widely by location. For example, Central London continues to see very strong retailer demand, as do large cities such as Glasgow and Liverpool where availability has continued to fall. In contrast, some smaller towns continue to struggle to attract significant retailer interest and availability in these locations is expected to remain high for some time to come.”

We’re taking a few days off now – and like all property professionals we will of course be reading the BPF’s new Property Data Report on the beach…

Desigual is paying a Zone A (prime area) rate of just over £700 per sq ft for 360 Oxford St, a 7,000 sq ft site opposite the Bond St tube station, replacing the Disney Store which reportedly paid a Zone A rent of £540 per sq ft to landlord Prupim. The Sunday Telegraph notes that the new Desigual rent is well above the previous Oxford Street record of £615 per sq ft set by Sunglass Hut in 2009, and comes despite the economic downturn and worries about consumer spending.

The Sunday Telegraph says it understands that retailers on this key London shopping street have seen recent rent demands increased by 20%, while The Independent says shops on Oxford Street now face increases of as much as 40% in their rents as the Desigual deal will be used as a bargaining tool in future negotiations between occupiers and tenants.

Desigual is said to have beaten off three rivals to the site – Mango, another Spanish retailer; shoe retailer Aldo; and mobile phone group O2. The Disney store is moving down Oxford Street to a site previously occupied by fashion retailer Mexx.

James Evans, office agency director at Savills, says there is a noticeable divide in the market and fierce competition between landlords for smaller enquiries. “This is set to continue in the short term although with no new completions set for 2010, looking forward we expect that those occupiers seeking to relocate will need to compromise on some of their criteria, the main one most likely being the ability to relocate to one floorplate. This should provide some welcome light at the end of the tunnel for landlords of smaller properties,” he adds.

Savills says research predicts that the take-up figure for Manchester offices for 2010 will be over 1m sq ft. This includes the proposed Co-op commitment to 328,000 sq ft. During the first half of 2010, 318,004 sq ft was taken up, of which 34% was Grade A. The group Savills says the professional sector dominated demand, accounting for 24% of the H1 2010 take-up.

The group says headline rents for offices in Manchester have remained fairly resilient and currently stand at £28.50 per sq ft. As the development pipeline is muted, Savills expects prime Grade A rents to rise, and rents for smaller, secondary space to fall further in the short term, with incentives firmly set in the tenant’s favour.

King Sturge notes that demand remains strong for the right product for investors in the Thames Valley area, and thinks the unprecedented shift in yields seen in the final quarter of 2009 is unlikely to continue to the same extent this year. During Q2 this year, yields for prime office assets remained steady, while secondary yields moved out, it adds in its Thames Valley Offices Q2 2010 report.

With regard to rent levels in the region, King Sturge says it feels that headline rents are now starting to level off after a period of decline. “A two-tier market is emerging where well-located, Grade A space will begin to see growth in net effective rents, but incentive levels will remain generous for more secondary stock,” it says.

Meanwhile, the office agency team for the Thames Valley at Lambert Smith Hampton has also been busy compiling its annual report into the market for office space in the area. It says that overall take up for 2009 was just 1.1m sq ft compared with 2.7m sq ft for 2008.

Nick Coote, head of LSH’s Thames Valley offices team, says that there are now signs of increased activity going forward. “We anticipate, so long as a double-dip is avoided, that the second half of the year will see increased levels of take-up. As forecasted last year, the supply side of the office market has remained relatively stable. As increased levels of take-up materialise, we can expect to see the market supply issues (shortages of quality stock) become exposed in some locations.”

LSH says that although some current transactions are very low-value, this may in fact indicate a better market dynamic going forward, as they reflect the fact that deals are actually being done. “Fatigued vendors are chasing down the early occupiers and, if they are followed by others, the market will start to regain its confidence and equilibrium,” the group says. “This will be reflected by a tightening of incentive terms and rental growth, particularly where low supply levels of quality offices are quickly exposed. However, this will be a longer process for some centres [in the region].”

The group calculates these three areas as: office space in the City of London; prime retail property in Manchester; and retail premises in the West End of London, assuming they are held for the next five years.

DTZ created its Fair Value index based on 180 property markets worldwide. The group’s global head of research, Hans Vrensen, told The Times that although yields on City offices had dropped steadily, supply remained constrained. In particular, he noted, large floor spaces were hard to find, so DTZ is expecting to see rental growth coming through as the economy recovers.

The expected return on City office space according to the index is 10.9% compared with an estimated required return of 7.6%, making this a “hot” category – it implies that offices in the Square Mile are underpriced by 11.6%, according to DTZ. But compared with other European markets, the UK’s property market is relatively unattractive as yields have dropped during the past year or so. Hot global markets include Los Angeles retail property, Sydney offices and Antwerp industrial sites, the Times reports.

The recent figures from the Bank of England show that bank lending to property in Q2 2010 dropped by £3.5bn after a slight improvement in the first quarter. Jones Lang LaSalle points out that this is the largest fall in a single quarter since the data series began in 1987. However, JLL says the statistics do not necessarily reflect banks’ reluctance to lend for property investment. “Bank debt is still available for property investors purchasing prime assets at sensible loan to value,” it comments. Instead, it says the figures show that banks are starting to deal with the problem loans on their balance sheets.

Barry Osilaja, director in JLL’s corporate finance team, said that if banks were indeed resolving their problems, in the medium to long term this would be positive news for UK real estate. However, in the short term, the market for lending was likely to remain restricted to prime assets, and overall net lending might continue to shrink, he added.

Cushman & Wakefield recently commented that while overall credit conditions have eased marginally, as shown by the Bank of England surveys, the flow of funds to business remains restricted. It has become slightly easier to obtain debt on commercial property, it says, with more lenders willing to lend as capital values have recovered and rents have stabilised. “Overall availability of affordable debt is however still less than the market needs and what is available is still focused on prime property, with lenders still very reluctant to finance more secondary investments where income security may be an issue,” the group notes. As a result, lending for 2010 looks set to remain muted, Cushman & Wakefield says.

There is a large amount of institutional money chasing investment deals, which has restricted the opportunities for banks to lend at reasonable levels, the group notes. In addition, much of the lending that has taken place this year has been for refinancing and restructuring.

In a recent commentary, the Telegraph noted: “The road ahead could be a slow one for those looking to invest, as banks are likely to take their time readjusting their balance sheets before being willing to back property schemes with loans. In the 1990s, according to figures from the Bank of England, it took from March 1991 to December 1997 for banks to reduce their exposure to property lending from its peak level to a low. This decade the corresponding peak was reached in July 2009. A return to boom times is obviously some way off,” the paper concludes.

A total of 1.59m sq ft of industrial property was let during the first half of this year. In the West London market almost 779,000 sq ft of space was let, up 3% from the second half of 2009. JLL notes that almost all this property was grade B, with grade A take-up accounting for just 160,000 sq ft.

Around Heathrow/ Feltham/ Poyle, only 118,000 sq ft was let in H1 2010. Although there is a good supply of quality stock available to let in this area, none of the property leased during H1 2010 was grade A, JLL notes. The Greenford area fared marginally better, with 140,000 sq ft let, although this was well down on the 374,000 sq ft let in H2 2009.

In the Heathrow area there is now 690,000 sq ft of vacant grade A stock with no new construction underway, the group points out.

Landlords were quick to respond to the slowdown last year by cutting rents, and JLL says it has seen evidence of further reductions in rents of 2%-5% so far in 2010. There are also generous incentives available – for grade B space, anything up to 22% in Heathrow, Greenford or Park Royal, and 15% in Slough.

If you are considering an industrial property to let in the Heathrow or West London areas contact NovaLoca on 0844 3575 260 and let us help you meet your requirements.