The next twelve months will see a significant shift in the supply and demand dynamics of Birmingham’s office market, according to the Birmingham Office Market Forum (BOMF).
The shift – which will see the tightening of available Grade A accommodation, leading to an eventual critical stock shortage and creating a greater reliance on refurbished Grade B stock – was highlighted at the organisation’s annual networking breakfast, held at Opus Restaurant.
Bringing together some of the city’s leading business and property players, the event also saw members welcome John Griffiths to the position of chairman.
Outgoing chairman and head of Jones Lang LaSalle’s Birmingham office, Jan Thompson, said: “We are at a critical and challenging point in the market where occupiers can no longer rely on the oversupply of legacy space.
“Unless we see an increase in new development activity, both large and small Grade A space, as well as refurbished Grade B stock, will be completely absorbed, leaving a significant gap in the market. Regardless of whether we are looking at a new development or refurbished property, from a funding perspective this is still a far more challenging environment that it has been historically.”
BOMF predicts that the shortage will be triggered by a number of coinciding lease expiries and break events, leaving exceedingly limited capacity for those businesses looking to move in 2014-16.
However, this shortage of space and the increased rents that it will create could stimulate investment, leading to further construction.
While there are new development taking place, including 2 Snow Hill – the only speculative development to be undertaken in Birmingham and one of just a handful across the UK – which is set to be delivered this year, most require upwards of two years to be completed, leaving a considerable interim stock gap.
This lead-in will have a definite impact on the immediate decision-making process for major occupiers.
John Griffiths, GBR Phoenix Beard, said: “The approach that we will see adopted is one that engenders greater collaboration with other organisations and bodies, such as the Greater Birmingham and Solihull LEP, Marketing Birmingham and the city council.
“We have a role to play in terms of guarding the future growth of the office market within the city and by working together as a single group we have a more powerful voice that will ensure that Birmingham remains a key commercial location.”
Keynote speaker at this year’s event was Steve Hollis, deputy chair of the Greater Birmingham and Solihull Local Enterprise Partnership (GBSLEP), who provided an update on the LEP’s progress to date and how Birmingham’s commercial property industry will benefit from initiatives such as the City Centre Enterprise Zone.
Steve Hollis said: “Birmingham has a great history of successful local governance and schemes such as Argent’s Paradise Circus redevelopment have been particularly well received.
“One thing that is abundantly clear is that Birmingham won’t be in a position to meet demand for new development without significant pre-lets, which won’t be delivered unless new-build development can be encouraged.
“In order to make the most of the opportunities that the LEP can provide to the city, we need to see additional devolution of decision-making powers from central government down to the local level, which will streamline the process. By injecting further confidence into the local governance we will be able to address this development issue and ensure that Birmingham continues to stimulate commercial growth.”
The networking breakfast also saw the launch of the sixth annual Birmingham office market map, which provides an essential update on office market activity that has taken place throughout the previous year, as well as giving an overview of the range and quality of Birmingham’s office stock.
John Griffiths added: “A key point of the creation of the Forum was to ensure that we had a consistent and granular set of market data and I believe that with the changing nature of the market, this precise data is going to become increasingly important.
“We now require detailed analysis as we are getting back to the point where the market has to be viewed in a building-specific way. Throughout all of this activity, we should not lose sight of the fact that Birmingham – in terms of property, staff availability and overall offer in the city centre – creates an incredibly competitive proposition.”
Formed in 2007, the Birmingham Office Market Forum works in conjunction with event sponsor CoStar Group, the leading provider of information services to commercial real estate professionals, providing a platform for members to share insights and provide an agreed analysis of statistics relating to the city centre office market.