Office take-up across the UK’s Big Nine regional cities remained steadily above the five-year quarterly average in the first quarter of the year, totalling almost 2 million sq ft, a 5% increase over the annual average.
The figures, released as part of Bilfinger GVA’s Big Nine report into commercial office activity across the UK’s nine largest regional cities, also demonstrated an appreciable slow-down in city centre take-up, which at 1,095,800 sq ft was 5% below the five-year quarterly average.
However, this was balanced by the out-of-town market, where take-up was 20% above the quarterly average, at 881,400 sq ft.
Manchester dominated the city centre activity, with over 317,000 sq ft of deals completed across the first quarter of the year. This is in comparison to Birmingham, which reported take-up of 129,000 sq ft for the same period, the fourth highest after Edinburgh and Glasgow.
While these figures place the take-up across Q1 slightly below the five year quarterly average for most cities, demand for quality space in Birmingham remains high.
Charles Toogood, Senior Director in the Bilfinger GVA’s Midlands office, said: “We are still seeing exceedingly strong demand within the central Birmingham office market, however the city’s development cycle is slightly out of synch with other regional centres, due to the relatively early development of 2 Snow Hill following the recession.
“Now that it is fully let with HS2 moving into all of the previously vacant space, Birmingham is having to play catch-up. While there is a strong pipeline for the delivery of brand new, high quality stock, this is either likely to be snapped up relatively quickly, or else is a few years from delivery.
“Goodman’s first speculative building at Eastside Locks, for instance, is the first next generation new build but it is anticipated that this will shortly be pre-let in its entirety to a single occupier, just a few months into the build contract.
“Hermes/Argent have started on site at Paradise and will deliver a significant 340,000 sq ft of speculative development in two buildings in the first phase. This is a substantial commitment, particularly relative to the regional city centre market, however the longevity of the build and lead-in mean that they will not be available until 2018.
“This causes some issues with balancing future supply but there is a good window for refurbishments, being led by Bruntwood’s 2 Cornwall Street, which will bring forward 115,000 sq ft and IM Properties’ 160,000 sq ft redevelopment at 55 Colmore Row .”
In addition to the news that HSBC will be taking 212,000 sq ft at Miller’s Arena Central scheme in Birmingham city centre, imminent demand has been further boosted in the region by ‘Project Mercury’, a 350,000 sq ft requirement in two phases this year and next.
There is also a number of high-profile named requirements such as Jacobs, HS2 Phase Two, and Network Rail, alongside increasing demand from professional services firms.
Carl Potter, National Head of Offices at Bilfinger GVA, said: “While there has certainly been an ongoing buzz around the regional office markets’ recovery, actual take-up rates have been less than reassuring. Having ended 2014 with all cities having very positive figures, record take- up rates and a new development cycle gaining momentum, it is clear that the ride back to a fully balanced market may well be a little bumpy.
“Despite the slightly underwhelming figures there is still room for optimism and as deals such as HSBC’s commitment to Arena Central in Birmingham and the other notable requirements fall into place and feed into the statistics we expect a good and resilient 2015.”