Office activity in Birmingham in the second quarter of the year has far outstripped that of the UK’s other regional cities.
Published by leading property adviser, Bilfinger GVA, the latest edition of the quarterly Big Nine report – which analyses city centre and out-of-town activity across the UK’s largest regional cities – demonstrates that Birmingham had an exceptional Q2, placing it 200% above the five year quarterly average.
The record-breaking activity saw take up of 650,000 sq ft, boosted by a number of significant transactions, including the 212,000 sq ft pre-sale to HSBC at Arena Central, for its new ringfenced banking headquarters.
This also placed Birmingham’s half-year figures on a par with the annual average and based on these figures, Bilfinger GVA predicts activity in the city to reach 1 million sq ft by the end of the year.
Carl Potter, National Head of Offices, Bilfinger GVA, said: “These figures demonstrate with absolute clarity the strength of desire within the market for high quality accommodation within the regional cities in general and Birmingham in particular.
“There are a vast number of projects currently within the pipeline with new-build schemes such as Paradise, Arena Central and East Side Locks, and the refurbishment of a range of properties including 55 Colmore Row and 2 Cornwall Street, due to bring new stock to the market to meet this appetite – but development is still not going to meet the levels of occupier demand into the near future.”
While Birmingham’s activity is particularly strong, the report demonstrates a strengthened confidence across the occupier market, with results for city centre and out-of-town take up across the nine cities examined at its highest level since the downturn.
City centre take-up in Manchester (359,829 sq ft) and Leeds (213,126 sq ft) followed in a similar vein, with the former attracting such headline grabbing deals as Ford Credit taking 45,000 sq ft at First Street and Freshfields securing 42,000 sq ft at Arndale House. Take-up in Leeds came in at 65% above average and the city also saw significant deals, including 51,000 sq ft pre-let to Addleshaw Goddard at 3 Sovereign Square, and 49,000 sq ft to PwC at Central Square.
Where supply has been tighter, cities such as Glasgow and Manchester have demonstrated higher levels of rental growth, whilst others are predicted to follow suit towards the end of 2015, as opportunities for occupiers requiring Grade A space within the prime areas begin to diminish.
Birmingham in particular, having only seen rents edge forwards in the past few years is predicted to have the highest rental growth prospects out of the nine cities due to this constraint on new supply.
Take up in the nine cities’ out-of-town markets has exceeded 1 million sq ft for the first time since the downturn started, and for Q2 2015 was 38% above the five year average. Deals in Solihull and Salford Quays make up a third of this total, with take-up in Liverpool and Glasgow also well above average.
Two exceptional out-of-town market deals include TalkTalk taking 106,000 sq ft at the Soapworks in Salford Quays and Interserve who have now obtained planning consent for their new145,000 sq ft redevelopment of International House, adjacent to Birmingham Airport in Solihull.
Carl Potter continued: “Take-up figures for Q2 reveal a strong demand trend, with rental levels increasing by an average of 11% across the nine cities over the past 12 months. This builds upon the previous year’s increase of 6% and has been coupled with a 30-35% decrease in incentive levels.
“Out of town there has been a similar success story and whilst the market was slower to recover from the lack of demand during the recessionary period, take up is now significant.”