Birmingham recorded the highest office take-up outside London and the South-East during Q2 this year.
According to CBRE’s latest UK Office Market Report, three of the five biggest deals transacted during this period were also in Birmingham, including 36,000 sq ft at Louisa Ryland House, 22,900 sq ft at Crossway House/156 Great Charles Street and 21,500 sq ft at 54 Hagley Road.
174,907 sq ft of space was let in the city in Q2, 15% up on Q1. In total, 327,000 sq ft was taken-up in H1, 12% more than the same period last year and the highest H1 take-up since 2020.
Whilst 37% of take-up in the UK was by businesses in the banking, finance and business services sector, activity in Birmingham was dominated by flexible office operators and the education sectors. Flex operator RE-defined was behind the latest Louisa Ryland letting, with Arden University snapping up space at Crossway House. Global Banking School acquired 44,000 at Norfolk House at the back end of last year, while higher education provider QAHE’s 45,000 sq ft letting at Louisa Ryland House remains the largest letting of 2023.
Despite a 49% uplift in take-up year-on-year, stock levels increased by one per cent. The 2,508,542 currently available represents 14.5% of available stock.
Theo Holmes, senior director and head of office agency at CBRE in Birmingham, said: “Businesses looking to move have a limited selection to choose from, be it prime secondhand or new ground-up space.
“Whilst the recent commencement of new speculative development at 3 Chamberlain Square, Paradise, by Federated Hermes/MEPC will deliver 189,000 sq ft of much needed ‘world class’ office space into the market in Q1 2025, we expect activity in 2024 to be predominantly driven by wholescale back to frame redevelopments. 19 Cornwall Street and 5 St Philips are the standout schemes currently under construction – collectively comprising circa 215,000,000 sq ft – so a supply squeeze is anticipated if take-up continues its current trajectory.”
Barriers to speculative development include the cost of finance and build cost inflation. Birmingham also suffers from a lack of sites.
Theo said: “There are a handful of realistic development opportunities, including the House of Fraser, Smithfield and Martineau Galleries sites but these are potentially longer-term plays.
“Birmingham desperately needs to expand outside its traditional core business district. The magnetism of HS2 we expect will encourage this.”
Prime rents in the city now exceed £41 per sq ft with continued upward pressure for ‘best in class’ space. Elsewhere in the UK regions, rents have already exceeded this level. In Manchester and Edinburgh rents have reached £43 per sq ft, while Bristol is £42.50 per sq ft. The UK’s top rent of £140 per sq ft is in London’s West End.
Theo said: “In comparison to other regional cities, Birmingham remains great value for occupiers and inward investors.”
