Martley Capital has completed the acquisition of Priory Court and The Lewis Building in the heart of Birmingham’s central business district as part of its UK regional office investment strategy.
The freehold asset, which was acquired for an undisclosed price for the Martley Capital Regional Office (MCRO) series of funds, provides approximately 254,000 sq ft of Grade A office and retail accommodation.
The property is underpinned by long-term government income and benefits from a weighted average unexpired lease term of more than seven years. The business plan for The Lewis Building is centred on proactive asset management, including leasing vacant accommodation, lease regears and targeted capital investment to further enhance the building’s amenity offering.
Rory Finnan, head of transactions at Martley Capital, said: “We continue to see value in the UK regional office market. Occupational markets are strengthening, prime rents are growing and the supply of high quality office space is becoming increasingly constrained, yet investment pricing continues to reflect historically weak sentiment rather than underlying fundamentals.”
Richard Croft, chief executive of Martley Capital, added: “The regional office opportunity is similar in construct to the industrial opportunity in 2010 and the retail warehouse opportunity in 2020. The occupational market is behaving in a markedly different manner to the investment market as was the case with the previous opportunities in industrial and retail warehouse sectors, which I believe will at some point lead to renewed investor interest in the sector.
“Whilst I have remained a long time exponent of regional offices, I accept that many investors remain unconvinced that work from home and AI will not substantially impact demand, which is what is giving us this opportunity. I happen to believe that WFH has morphed to a more office friendly agile working requirement and that AI, whilst it will have an impact, could lead to substantially enhanced productivity that in turn could cause an upswing in the economy.
“Regardless of that though, the construction inflation that the market has experienced over the last five years, coupled with the impact of ESG and permitted development, means that there has been a substantial reduction in stock over the last 10 years. We expect that reduction to continue and that provides a substantial mitigant to any demand impact – which is why we are seeing record rental growth in the sector.”
