Birmingham has more active enquires for Grade A offices than any other regional city in the UK.
According to Knight Frank’s ‘Regional Offices Occupier and Investment’ market report for the second quarter of 2015, the city accounts for 945,000 sq ft out of 4.4m sq ft of office space enquiries across ten regional cities.
Jamie Phillips, a partner and head of the office team at the Birmingham office of Knight Frank, said: “It’s a great credit to Birmingham that more than 20 per cent of regional office enquires are focused on the city, which is proving a great draw not just to traditional indigenous occupiers, but to inward investors too.”
However, there are concerns about Birmingham’s ability to satisfy this demand. Take up in the city in the second quarter of 2015 was higher than in any other regional city, with more than 520,000 sq ft transacted, a fourfold rise on Q1. Manchester boasted the second highest take-up outside London in Q2, with just shy of 400,000 sq ft of office premises taking down their ‘to let’ signs.
Mr Phillips said: “Whilst take up has been fantastic, the bad news is that his has left Birmingham with the lowest levels of Grade A stock outside London. We currently have just one year’s supply. What’s more, half of this is not even currently available, it’s still under construction!”
It will be more than two years before high profile new build schemes such as 103 Colmore Row, Arena Central and Paradise start delivering new space to the market. In the meantime, the focus will be on refurbishment schemes, including 1 Colmore Square, 55 Colmore Row and Two Cornwall Street.
As well as encouraging refurbishment, the lettings boom is driving rental growth.
Mr Phillips said: “Rents are currently £30 per sq ft but they are anticipated to rise to £31 per sq ft by the end of this year. By the end of 2016 we are predicting that prime rents in the city will be £33.50, finally breaching their pre-recession high.”
The prospect of long overdue rent rises has finally fired the gun on speculative development in the city.
According to the Knight Frank report, some 900,000 sq ft of new space is forecast to be delivered by 2018, much of it speculative.
Mr Phillips said: “The letting of 46,000 sq ft of space to Birmingham City University ahead of completion at phase one of Eastside Locks is an early indication of the appetite for new build space.”
The biggest speculative single office scheme is Sterling Property Ventures’ and Rockspring’s 103 Colmore Row, where work dismantling the mothballed NatWest Tower has now begun.