Birmingham’s office space race
Birmingham is enjoying an unprecedented level of enquiries for office space, according to property consultancy CBRE.
Last year the city chalked up more than 1m sq ft of lettings. Concerns of a ‘hangover’ following the record year have failed to materialise, with a strong start to the first half of 2018.
Will Ventham, who heads the offices team at CBRE in Birmingham, says levels of demand in the city are in great health, from a range of sectors.
“If you compare last year’s figures across the same period in 2018, the Birmingham office market continues to outperform some expectations.
“The suggestion that 2017 was a record year merely as a consequence of the 238,988 sq ft letting secured to HMRC at 3 Arena Central is simply misleading. It isn’t so long ago that we were in the depths of recession and yet Birmingham survived throughout this period on the robust platform of existing businesses in the region. Fast forward and we are now experiencing increased, and sustainable, levels of inward investment to support further growth.
“After scoring seven figures last year, the prevailing sentiment was that business would be slow in the first half of 2018. This has not been the case, momentum has continued. With 318,412 sq ft of lettings in the first half of 2018, we are considerably over – 26 per cent – the 248,466 sq ft take-up achieved in the corresponding period last year.”
Flexible office providers are not yet satiated with serviced operators featuring heavily in this year’s take-up stats. BE, Instant, Orega and iHub all took space in the central business district, with IWG expanding in Edgbaston. The largest traditional occupier lettings in the first six months were to engineering consultancy WSP (46,100 sq ft) at The Mailbox, the Environment Agency (26,799 sq ft) at Aqua and West Midlands Trains (21,743 sq ft) taking 134 Edmund Street.
Going forward, there remain notable unsatisfied requirements in the traditional professional and financial services sectors together with the ongoing drive towards moving civil servants out of London from the public sector and quangos. Birmingham increasingly features high on the shopping list of inward investors, the latest example being the General Dental Council’s commitment to new offices in 1 Colmore Square.
Last year, back-to-frame refurbishments satisfied a large proportion of demand for Grade A accommodation and the city welcomes the next wave of opportunities on the horizon, most notably in the form of Platform 21 with anticipated delivery of 112,000 sq ft in late 2019.
“Cornerblock, 55 Colmore Row and the Lewis Building were runaway successes in 2018, alongside the notable pre-let activity at One Chamberlain Square and 3 Arena Central; this success has resulted in Grade A space fast depleting so it is great that the city’s significant new builds are within sight of completion.
“Two Chamberlain Square and Three Snowhill will add more than 600,000 sq ft to the stock pile, meaning Birmingham remains perfectly placed to open its doors to further inward investors. It’s inevitable that this space will see pre-completion activity which will, in turn, stimulate a further wave of speculative development. Schemes such as One Centenary Way (280,000 sq ft) and 5 Centenary Square (147,000 sq ft), having secured detailed planning consent, offer compelling opportunities for the next cycle of occupiers aspiring to be in Birmingham.”
The top rent for Grade A space in the city remains at £33 per sq ft.
“Unfortunately, the fixation on rent per sq ft is a historic trait of the property industry but it’s rarely an occupier’s main focus. CBRE’s latest global occupier research supports the increasing weight of importance that businesses are placing on providing the best workplaces for their employees. The ability to recruit and retain staff is regularly becoming the key driver to occupational decision making.
“Birmingham has returned to headline rents of £33.00 per sq ft, through the transactions secured at 55 Colmore Row, and we anticipate further upward pressure on rents over the coming 12 months reflective of the quality of product being delivered into the marketplace coupled with the desirability of the Midlands as a region for business prosperity.
“The region as a whole is experiencing similar trends to those within the city centre. Out of town rents are on the rise, and we anticipate that the M42 corridor will reach new headline levels by the end of the year.”