UKInvestments: A landmark property in Birmingham's city centre may sell to an Irish investor for over €15m. But getting a piece of the action in this now thriving city isn't easy. Edel Morgan reports

Birmingham may have undergone more development activity in the last three years than in the previous 40, but Irish investors have been finding it difficult to get a piece of the action.

While they have been chasing high profile commercial properties in Birmingham, capturing them has proved a challenge.

Like many English cities north of London, Birmingham's city centre skyline is populated by cranes - and an estimated further investment of £5.1 billion (€7.5 billion) is promised over the next 10 years in what has emerged as a young, dynamic city.

But while there are numerous exciting developments in the pipeline, a current lack of suitable product has led to bidding war situations when high profile properties come up.

This situation is unlikely to change for the foreseeable future, predicts Ashley Hudson, associate with Knight Frank, who describes the Birmingham market as "very tight with less than a handful of properties at any one time. The institutional funds are under pressure to sink more money into property but there is little or no suitable stock available at the moment."

Office take-up last year was the lowest in eight years but this can be explained by the distinct lack of Grade A space.

One of the few landmark properties on the market at the moment is numbers 79-83 Colmore Row, which is occupied by the Royal Bank of Scotland. It is on the market for £9.8 million (€14.7 million), although with competition from Irish and other investors it is expected to go for over £10 million (€15 million). According to Hudson, a number of Irish investors have shown interest. "It is the type of property that is likely to go to an Irish investor. It is a trophy building in a prime city centre location with a secure rental income."

Irish investors have been a pervasive force in prime city centre Birmingham, alongside Germans and Middle Eastern investors.

One of the high profile deals of the last 12 months was the sale of 5 St Philip's Place, one of the city's most prestigious landmark office buildings, to clients of the Bank of Ireland for £37.75 million (€56.79 million), reflecting a net initial yield of 5.85 per cent.

Direct Line House sold to clients of Sherry FitzGerald Capital in May 2003 for £23.14 million (€33.81 million), and 2 Brindley Place was sold to clients of Bank of Ireland for £30.4 million (€45.7 million) in September 2003.

Good retail is also hard to find in city centre Birmingham, says Barry O'Donnell, investment director with Jones Lang La Salle. Despite the fact it has undergone a retail renaissance "you can't get a piece of it", he says.

The sheer scale of the £500 million (€750 million) revamped Bullring shopping area is overwhelming. It is Europe's largest city centre development at 111,485 sq m (1.2 million sq ft), covering 16.2 hectares with two main anchors, Selfridges and Debenhams.

Its developer, the Birmingham Alliance, practically has the city centre "sewn up" according to one industry source.

It is easier to find good retail properties outside Birmingham in Walsall, Coventry, Nottingham, Leicester and Solihull.

"Nottingham, for example, is sought after because it has a big university, good population growth and it fares well in surveys of the best places to live."

While retail and office opportunities are thin on the ground, O'Donnell believes the success of the Bullring will usher in a plethora of new developments.

Developers stalled in anticipation of the huge success of the new Bullring shopping centre before confirming plans for Eastside.

While the Bullring/Broad Street/Brindley Place area snares most of the attention, the £6bn (€8.9 bn) regeneration of the 420-acre Eastside is aimed at making the east of Birmingham as desirable as the west. The success of the 111,484 sq m (1.2 million sq ft) mixed-use space is critical to the long-term success of Eastside and the impact it will have on the region's construction industry is considerable.

Arena Central, a city centre office scheme which will have a landmark 50-storey tower, is expected to push up the value of the adjoining Paradise Circus site.

Marketing Birmingham, a body set up in 2002 to boost the image and profile of the city, knows it has its work cut out to change outsiders' perceptions.

The city may have been transformed but many people's opinions of Birmingham sadly have not, says the organisation's website.

This outdated image stems from a period of mass unemployment and stagnation which began 20 years ago when its bedrock manufacturing industry dwindled and Birmingham was left without a focus.

A plan to revitalise the city's core began in the 1980s - by demolishing eyesores on the landscape and promoting mixed use development - is beginning to reach fruition in the city centre with some stunning and boldly modern development.

However, predictions are that when supply improves, Birmingham will take off in earnest with companies relocating on a bigger scale from London. Prime offices in Birmingham are cheaper by half to occupy than London's West End.

Prime office rents are currently about £27.50 (€41.37) per sq ft, compared to £66 (€99) per sq ft in London's West End and £48 (€72) per sq ft elsewhere in London. However, this is still more expensive than Manchester at £24.75 (€37.23) per sq ft and Edinburgh at £27 (€40.61) per sq ft.

The outlook for 2004 is good. A recent survey revealed that Birmingham ranked second in the top UK cities to live in after Leeds. Sixty-four per cent of residents in Birmingham described their quality of life as excellent.

The new Bullring has created 8,000 new jobs and a need for more inner city residential accommodation. There are now 5,000 people living in the city centre and this is expected to rise to 20,000-40,000 in the next decade.

A five-minute walk from the main shopping area is the €150 million Mailbox development on Wharfside Street, formerly the unsightly Royal Mail sorting office, and now mixed designer retail, hotel and luxury residential scheme.

The city has benefited to the tune of £500 million (€752 million) in EU structural funds since the early 1980s which has seen the construction of the National Sea Life Centre, the international convention centre and Symphony Hall and the Ikon Gallery on Brindley Place.

"Before the Bullring happened, there was indecisiveness over other new developments because there was uncertainty whether it would ever happen," says O'Donnell. "But it has been a decided success, so we are likely to see a number of office and retail schemes that were on hold taking off. Birmingham has a catchment area of over five million people and is Britain's second city. It has made up a lot of ground on Manchester and Leeds, which have also transformed themselves."