A two-tier market is emerging in Birmingham’s flexible office sector, according to new research from CBRE.
The global property consultancy’s latest Flex Market Update shows a gulf in occupier levels between higher priced, best-in-class space in the city – which is 85% to 100% full – compared to ‘no frills’ operations with fewer amenities, where voids are between 35% -55%.
The gap is also reflected in rents, with entry level costs now at £100 per sq compared to top rates of £155 per sq ft.
According to Dan White, CBRE head of flex Midlands & South, demand remains highest at the quality end of the market.
He said: “High-end workspace with hotel-like amenities and excellent customer service from in-house teams are key requirements as businesses look to their space to drive employee engagement. Current asks include larger break-out spaces, areas dedicated to different types of work – from informal meeting and drop-in spaces to conferencing facilities – club/bar space and gyms. Good coffee is now a given.”
While enquiries at the close of 2023 remained buoyant, 22,000 sq ft of flex space was transacted by CBRE’s Midlands and South flex team in the first six weeks of 2024 alone.
Retention rates are also increasing. Sixty per cent of occupiers placed in flex space by CBRE in 2022 re-signed for 2023. Average initial terms and transaction sizes in Birmingham are similarly rising, now at 15 months and 2,500 sq ft respectively. Average occupancy across the city is now 85%.
As a result, interest from operators looking for space in the city remains keen. Runway East is the latest to find a foothold in Birmingham, taking 20,000 sq ft at Oval Real Estate’s Arca. Redefined, a MAPP company, opened its account by taking 23,000 sq ft for office space and conference facilities at Louisa Ryland House last year.
Whilst operators initially played it safe, opting for city centre offerings, success beyond the central business district is now proven. At Brindleyplace, Spacemade’s 10X is now fully occupied, while x+why scored the largest flex letting outside London at Foundry, in Q3 2023.
Further afield, there are signs of an emerging out-of-town market. Orega completed the acquisition of c.30,000 sq ft at Abrdn’s Ingenuity House, Solihull, last year, with150 desks pre-sold to a High Street bank.
Dan White said: “Whilst flex occupiers may be prepared to look in a more diverse range of locations, they are sticking to their guns when it comes to quality. Operators who can deliver this can be confident of selling desks.”
