Strong activity in the Birmingham office market in the third quarter of the year pushed well ahead of the five year quarterly average.
This is one of the findings of the latest Big Nine report, which analyses and compares activity across the UK’s nine major office markets and is produced by commercial property advisor, GVA.
In Birmingham, take-up in the city core totalled 156,202 sq ft – well above the 150,579 sq ft average. This puts Birmingham second only to Glasgow in terms of total number of city centre transactions, with the Scottish city recording 213,430 sq ft of deals completed in the same period.
In the out-of-town markets, Birmingham also saw above-average transactions, with 125,508 sq ft of transactions completed, above the five-year quarterly average of 77,470 sq ft.
George Jennings, Associate in GVA’s Midlands office, said: “The findings of the latest Big Nine clearly demonstrate that there is considerable upswing in the market as health and confidence continues to return.
“It will be interesting to consider this quarter’s results in comparison to the figures for Q4, as they will include the 99,000 sq ft letting to HS2 at Two Snowhill, plus a handful of substantial sized lettings which will without question provide a considerable boost to the figures and attract further occupiers to the city.
“After a quieter first half of the year, this deal will doubtless help to push Birmingham’s projected annual take-up near to the long term average of around 650,000 sq ft.”
According to the report, activity across the UK as a whole is higher than the previous five year averages, putting the market in a strong position to eclipse the annual take up levels recorded in 2013.
Take-up in Manchester, Glasgow and Bristol has already overtaken the annual average for the previous five years, and there are a number of significant prospective deals in the big nine cities likely to act as a catalyst for further occupier activity in the final quarter of the year. These include the design and build for BBC Wales at Central Square in Cardiff and the interest being shown in the speculative developments in Bristol (see ‘In Focus’ section of the report).
In Cardiff, the BBC’s long-standing requirement for relocation from LLandaff to the Council / Rightacre’s site at Central Square has been agreed. The deal is a 150,000 sq ft design and build, on a 20-year lease, three years rent-free and at a rent in the region of £21 psf. The scheme is likely to act as a catalyst to further occupier activity in the city.
Strong activity in Glasgow has been led by deals to Network Rail and Clydesdale Bank, as well as a handful of 20,000 sq ft deals. Pre-letting enquiries have also been buoyant on buildings under construction, which bodes well for imminent future take-up. With an estimated 2 million sq ft of lease events by 2018, we believe the city once again isn’t far from the next phase of development activity.
Occupier confidence shows no signs of ebbing in the central Manchester market with total take up approaching 1 million sq ft take-up at the end of Q3. The story is now the quantum of deals rather than headline-grabbing transactions. The final quarter could well see pre-let commitment from the likes of EY (35,000 sq ft) and PWC (45,000 sq ft) at schemes close to starting on site, most notably at 2 St Peters Square and No 1 Spinningfields. The Cotton Building at Spinningfields (160,000 sq ft) remains the only scheme under construction in the city, known to be high on the wish list of Shoosmiths (30,000 sq ft) and Global Radio (18,000 sq ft).
In Edinburgh despite the uncertainty and low levels of take-up in Q3 caused by the referendum, business confidence is strong. The TMT and charity sectors have been particularly active this quarter and we are now likely to see a pickup in activity from financial and legal firms.
The largest deal in Leeds this quarter was 27,289 sq ft sub-let from Eversheds to the Department of Health. With two significant pre-lets in the pipeline, we anticipate a strong finish to the year. In Liverpool there is now only 100,000 sq ft of new grade A supply following sizeable deals such as 22,000 sq ft to Mercers at 4 St Pauls Square and 11,000 sq ft to WP Thompson at 1 Mann Island.
Carl Potter, National Head of Offices at GVA, comments: “The level of occupier activity is underpinning decisions by a number of funds to move into the regional city development markets during 2013 and this is clearly now paying dividends with much of the new Grade A space being let at or before completion. There are still a number of cities where new speculative development has yet to commence in earnest, though the positioning of developers and funds to move forward with key sites in each city is continuing to gather momentum.
“What we have not yet seen is much pure speculative forward funding and this still remains difficult to achieve, except where the occupational story is absolutely solid. The continued high levels of take up and our analysis of future demand within the core city centres will begin to change this.”