Economic conditions are on the up according to the leading quarterly regional office market report by GVA, which recorded regional take-up of 7.73 million sq ft in 2013, the highest annual take-up within the last five years.
The Big Nine reports in 2013 GVA’s nine city centres recorded the highest level of annual office take-up within the last five years, a total of 4.82 million sq ft. City centre take-up totalled 1,358,293 sq ft in Q4, 29% above the five-year quarterly average and highest quarterly take-up since 2010.
In Birmingham, increased professional financial and business services demand has reflected improving market sentiment and occupier confidence, supported by encouraging levels of inward investment.
The largest deal completed in Birmingham in Q4 was the 33,460 sq ft letting to Legal and General at Bruntwood’s Centre City tower.
The most significant deal of the quarter, however, was the start of construction on Scottish Power’s 220,000 sq ft stand-alone HQ in Glasgow, which accounted for an increase of 45% on the year-on-year average.
Carl Potter, Director and Head of National Offices at GVA, said: “It is clear both from investor sentiment and the levels of occupier demand that the UK’s regional cities are once again beginning to push forward. However, moving forward there are clear constraints which will curb new speculative office development.
“Whilst we have seen the early signs that this market is returning Birmingham is unlikely to see a raft of new development coming forward to meet the growing demand for offices.
“The plight of our main commercial lending banks and their overhang of exposure to this part of the market, coupled with the inherent risk and associated governance suggest that the right circumstances will not be in place for more than a handful of new schemes.
“Indeed it is unlikely that there will be more than one new speculative office development completed in the centre of Birmingham until 2017.
“This will provide selective rental growth during 2014 onwards. Already investors are showing more willing to consider an increased exposure to risk where the right levels of return justify it, and this has caused a significant upswing in market sentiment over the past two quarters.
“From an occupational perspective there are now a fairly significant number of deals close to finalisation which suggests that we should see 2014 being even better. However there is a caution being placed against the market in so far as a lack of supply could well throttle back the levels of take up that might otherwise have been evidenced.”
Office take-up in the out-of-town markets also recorded the highest annual total within five years; Q4 recorded 804,500 sq ft, 29% above the five-year quarterly average.
In the Midlands this is being evidenced from within the growing high end manufacturing and automotive sectors which continually expand to support the Region’s renaissance in these sectors.