Union Investment buys Commerz office scheme in Birmingham

Hamburg-based Union Investment Real Estate is acquiring an office scheme in the UK city of Birmingham from fellow German property investor Commerz Real.

The investment volume was not disclosed but UK property publication Property Week estimated the price at around £125 mln (€148 mln).

The property, One Snowhill, is located within Birmingham’s central business district and in the immediate vicinity of Snowhill railway station with direct rail links to London and the West Midlands.

The property comprises 24,500 m2 of rentable area, with 94% occupancy. The bulk of the space is used by Barclays Bank and management consultancy KPMG. Law firm DWF also became a long-term tenant earlier this year.

One Snowhill has been awarded a BREEAM sustainability certificate with the rating 'very good'.

Commerz Real and Union Investment announced on Monday that they had signed an agreement on the sale and expected to close the deal by the end of the week.

'We are acquiring one of the best office buildings outside London in One Snowhill. After investments in Manchester, Glasgow and most recently Cardiff, this opens up another important regional location in the UK, thereby continuing an investment strategy which is adapted to the growing strength of the London investment market,' said Martin Brühl, head of international investment at Union Investment.

One Snowhill will help to further diversify the UK portfolio of Union Investment's Europa fund, which consists of three properties worth some €520 mln in total.

As the UK's second-largest city with about one million inhabitants, Birmingham has a broadly diversified, dynamically evolving economy with an emphasis on the automotive and financial services industries. Rents are forecast to increase in the Birmingham office market over the next few years, especially in the core segment, Union Investment said.

The building had been in the portfolio of Commerz Real's open-ended real estate fund hausInvest since 2010. Commerz Real said that the sale results from the decision to reduce the fund's office exposure in the UK 'by a moderate amount' in favour of future investments in the retail sector.