Secondary office investment at 10-year low 

Investment into secondary offices across Western European markets is at its lowest for 10 years, according to BNP Paribas Real Estate.

The agent analysed the performance of second tier offices in 16 secondary locations, including Birmingham and Manchester.

It found take-up had increased by just 2% in the first quarter compared with the previous quarter, with the gap between supply and take-up remaining high and the risk of vacancy set to increase if economic conditions deteriorate.

BNP PRE international investment director Andrew Cruickshank said: "Office investors are generally still averse to risks, and remain focussed on prime assets and locations. Prime yields have remained at low levels, but there is a possibility that these move upwards as the eurozone crisis continues."

GDP growth in the region slowed over 2011, with most economies recording a contraction in Q4 2011.

The trend has continued in Q1, and BNP PRE said it now expects flat annual growth in western European economies overall.

German offices outperformed their European rivals with some of the highest take-up levels in the past 10 years.

French cities have also profited from a growth in GDP during 2011, which reflected positively on the main regional office markets.

However, BNP PRE said conditions in 2012 "do not seem as favourable".

Most UK cities experienced a difficult 2011, with take-up remaining well below average levels.

Cruickshank added: "We have seen a marked improvement in risk appetite in recent months on the back of increased liquidity under the ECB's LTRO programmes. While financial market sentiment has improved, sentiment in the real economy is still cautious."