Transactional office activity in Birmingham city centre is on track for a record year, despite a slow third quarter which saw 90,779 sq ft of activity, below the five year quarterly average.
Despite the muted activity in Q3, the city is due to finish the year on a high, with strong activity in the first half of the year and significant deals currently under offer expected to push totals for 2015 over 900,000 sq ft.
Within the city core, rental growth is continuing to rise, with headline rents now exceeding the £30 psf mark and aspirations from investors to achieve £32 psf on new stock by the close of the year.
In contrast to the city centre market, Birmingham’s resurgent out of town office sector continued to perform strongly, with 94,001 sq ft of deals completed in Q3, well above the quarterly average of 90, 294 sq ft.
These figures come from the latest edition of the quarterly Big Nine report from Bilfinger GVA, which studies regional office occupier markets in the UK’s nine largest cities. Overall, the UK’s regional offices are performing well, with 2015 showing the highest Q1-3 take up (6.9 million sq ft) since the downturn.
Charles Toogood, Senior Director, Bilfinger GVA, said: “Take up across the first three quarters of the year has totalled some 740,000 sq ft, with a significant pipeline set to put us on course for a healthy year end. Alongside growing rental income, which is behind only Manchester in terms of the key English regional cities, we are continuing to see falling incentives, currently down from 30 to 24 months’ rent free on a 10 year term.
“Birmingham is continuing to be viewed as a strong investment prospect both from UK funds and institutions and overseas investors and we expect that the coming 12 months will see even greater levels of activity. Infrastructure improvements such as those taking place around Paradise and the recently redeveloped New Street Station will continue to add to Birmingham’s rising stock as a desirable place in which to do business.”
The Big Nine also indicates that Manchester has seen impressive take-up in the city centre, driven by pre-let activity, equating to almost 50% above the five-year average. Newcastle and Liverpool also saw strong activity, with lettings running at twice the quarterly average in the former and 48% above average in the latter. The largest deal of the quarter was 60, 2000 sq ft pre-let to NCC Group at XYZ building in Manchester.
Continuing in the same vein as Q2, where take up in the nine cities’ out-of-town markets exceeded 1 million sq ft for the first time since the downturn, the report highlights how these areas are still performing well and currently achieving 12% above the five year average.
In Q3, take-up totalled 859,900 sq ft in the out-of-town markets, with Manchester and Newcastle performing especially well and taking all the spots in the top five out-of-town deals table. Accenture comes in at first position, occupying 57,100 sq ft in Newcastle’s Cobalt Business Park, with Syngenta following in second place, taking 32,330 sq ft in Crescent House, Didsbury, Manchester.
Carl Potter, Senior Director and National Head of Offices at Bilfinger GVA comments: “The lack of speculative development, and hence Grade A stock, is beginning to lead to pre-let activity evidenced across a number of city centres. Whilst the increased levels of activity have been previously more noticeable in the larger UK Core Cities, there is now evidence that the smaller Core Cities, such as Newcastle and Liverpool are also benefitting from increased take up levels.”