Investors targeting non-prime assets, says DTZ
Activity in the West Midlands' secondary property market is on the increase, according to DTZ's 'Money into Property 2011' report.
The report also suggested that investors are set to "selectively move into non-prime assets and value-added strategies", as the prime-secondary yield gap is expected to narrow further.
Across the UK, transaction volumes increased by 46 per cent to £33.4bn in 2010. The figures are expected to rise a further 11 per cent this year.
Hans Vrensen, global head of research at DTZ, said: "2010 saw the first increase in invested stock in the UK since 2007. This followed strong equity growth, which was only partially offset by a decline in private and public debt. UK invested stock is projected to grow by less than half the global average in 2011, on the back of moderate further capital value growth."
Nick Allan, senior investment director at DTZ for the Midlands and South West, said prime property in the region was now "fairly priced", allowing investors to move up the risk curve.
He said investors would now begin to target non-prime, non-core markets for opportunities.
"This is being facilitated by increased lending, partly from non-banks, and a more stable economy," he added. "As the prime recovery extends into secondary markets, investors will need to work secondary assets to improve cash flow and capital value to realise attractive returns.
"More properties have become available as lenders start to take action on defaulted loans. Lenders are not always opting for an immediate sale however, with the administrator/receiver of both Baskerville House and Centre City in Birmingham choosing to undertake asset management initiatives prior to selling in order to increase the price.
"It is not only lenders selling in today’s market. Other investors are now disposing of assets, often at the end of a fixed investment period/business plan or to rebalance a portfolio. For example, DTZ advised on the successful sale of One Victoria Square, a prominent office building in Birmingham, at the end of 2010 for £17.5m."
