Following a stellar year for the city, Birmingham will move into a higher growth trajectory in 2016 says JLL at its annual property predictions event in Birmingham.
Last year’s record investment volumes – which saw £710 million transacted in the Central Business District (CBD) in 2015 – are set to continue, albeit perhaps from fewer deals, with £400 million already on offer this year across two deals. Office rental growth in the city is also set to outpace Manchester and the UK average with JLL research projecting a rate of 4.2% over the next four years.
JLL spoke of a renewed confidence and swagger in the city, however stated that the investment market would be driven more by long term rental growth than yield compression.
Prime headline rents in CBD in 2016 are expected to rise from £30 per square foot at the turn of the year to £32/33 per square foot, a level last seen prior to recession.
Jon Neale, head of research for JLL said: “The hugely improved arrival experience and amenities with the opening of key infrastructure projects such as New Street Station and Grand Central would propel Birmingham forward to the front of the Big 6 for companies looking to north shore their operations from London and the southeast.
“Rising house prices are moving from being a social policy issue to an economic one and a key business challenge for large corporates looking to attract the best talent. Major regional cities will provide a very real option for businesses who want to optimise their London footprint and move some staff to lower cost base locations where housing is more affordable.”
This renewed interest in Birmingham, which saw practically every major asset in the city transacted last year and a record office take up of nearly one million square foot, has also led to a scarcity of supply as Jonathan Carmalt, director office agency explained: “Refurbishment will drive the office market again this year, most of which is relatively modest in size at present and well let probably before completion. The Colmore Building is the only substantial grade A space in the CBD with immediately available floor plates of circa 23,000 sq ft and further new build options will not be available until 2017. A lack of Grade A is also reflected in the out of town market and headline rents will move too from their established £21 per square foot to a new high of £23.50.”
Birmingham’s predicted population growth and the continued swell of online sales will see retailers rushing to the Midlands to secure urban logistics units in key locations next to major conurbations.
Carl Durrant director Industrial and Logistics JLL said the dark clouds had parted and the summer had arrived. JLL completed four million square foot of deals in the Midlands in 2015, predominately big sheds -100, 000 sq ft and over. However in 2016 Carl said he saw speculative building returning and for units 15-100,000 sq ft – an event not witnessed for nearly 10 years.
Urban Logistics units too will be attracting investors says Allan Wilson, director and head of investment at JLL. “A return to the classic multi-let unit will be seen and smaller units capable of “last mile delivery”.
Ian Cornock lead director JLL concluded: “There is definitely an optimistic mood for 2016 and whilst geopolitical issues such as BREXIT may create a pause, we believe Birmingham has never been in a better place and will continue to grow.”
