Available Grade A office stock in Birmingham city centre is now at a four year low, according to latest research by Colliers International.
Despite the economic downturn and low levels of business confidence, the property consultant’s bi-annual ‘Net Stock Absorption’ research shows that 204,418 sq ft of the city’s best office space was newly occupied in 2011.
As a result, Grade A vacancy is now at just six per cent, the lowest it has been since 2007.
Key lettings last year included The Law Society’s commitment to 57,291 sq ft at The Cube, and Grant Thornton’s move to 26,564 sq ft at Colmore Plaza.
Take-up in the second half of 2011 reached 355,000 sq ft, the highest half year for the central business district since the first six months of 2008. However, the notable change was Grade A absorption within the traditional core, which was up 55% on 2012, leaving just 464,668 sq ft new build Grade A space without a tenant.
Whilst take-up of Grade A space has held up during the downturn, in total, city centre availability fell by just one per cent in the last year.
The availability of Grade C accommodation – that is, space older than five years, without air conditioning and in need of substantial refurbishment – increased by 25 per cent as occupiers sought a better quality of product in core locations
According to Alex Tross, associate director in the office agency team at Colliers International, the take-up of Grade A office space is encouraging, particularly in the current economic climate.
However, given that Birmingham has approximately 900,000 sq ft of lease events for units in excess of 30,000 sq ft coming up within the next four years, he is concerned about a looming supply crisis.
He said: “This ready-made pipeline of relocations and upgrades is good for existing schemes, and those under construction or with planning permission.
“However, the only new space guaranteed to come to the market between 2013 and 2015 is 120,000 sq ft at Two Snowhill and 133,000 sq ft at Five Brindleyplace.
“Whilst both these developments will command strong interest from potential occupiers, once they are snapped up the options for those looking for new space will be extremely limited. It doesn’t take a mathematician to work out there will be insufficient stock to meet future demand.”
The looming shortage of Grade A stock has yet to impact on rents.
According to Colliers International, prime rents have plateaued at £27.50 psf and the firm predicts there will be no significant change in 2012.
Mr Tross said: “While rents will remain stable this year, incentives are likely to be squeezed. There will be moderate growth in 2013.”