Birmingham’s city centre and out-of-town office markets have remained ahead of the five year quarterly average despite uncertainty caused by the European referendum.
While the quantity of transactions was down slightly, reflecting market uncertainty leading up to the vote, the market has remained buoyant through a small number of larger deals, pushing the quarterly figures 15% above the average.
This included Network Rail’s 83,000 sq ft letting at Baskerville House, the largest to have taken place in any of the nine regional cities.
Similarly, the out-of-town market saw a significant lift against the five year quarterly average of 90,142 sq ft, with 102,649 sq ft of deals led by Uniper’s 32,700 sq ft letting at Birmingham Business Park.
Coupled with a record-breaking Q1, this means that Birmingham has recorded over 500,000 sq ft of transactions in the first half of the year for the second year running.
Charles Toogood, Senior Director at Bilfinger GVA, said: “Despite the uncertainty as we approached June’s referendum there was still strong confidence across Birmingham’s office markets, with viewing activity and enquiry levels maintained.
“With changes at the top tier of government and the ongoing discussions around the UK’s exit from the European Union we will almost certainly see greater levels of caution throughout the sector. However, the limited availability of good quality stock due to continue for at least the next 12 months will provide a degree of insulation.”
Nationally, take-up throughout the Big Nine office markets during the second quarter was 3% below the five year quarterly average. Despite this market uncertainty fuelled by the referendum, however, overall take-up figures have held up well.
Carl Potter, Senior Director and national head of Offices at Bilfinger GVA, said: “Aside from Cardiff, Bristol, Birmingham and Glasgow, each of which saw significant deals to record above average take-up, the other five city centres saw activity slowing as had been expected in the lead up to the referendum.
“The second quarter has held up reasonably well all things considered. Some significant deals have completed in the public and insurance sectors and underlying demand across the Big Nine remains strong, particularly given the reorganisation of the public sector estate and a large number of private sector lease events.
“Some occupiers have been reviewing their position in light of Brexit and it is likely that this will impact on take-up for the second half of the year. Nonetheless it is too early to judge how significant this will be. Certainly any impacts on value of Grade A stock are anticipated to be insulated by the comparatively subdued development pipeline.”
City centre total take-up amounted to 1.22 million sq ft (3% down as previously highlighted), whilst out of town take-up covered 0.79 million sq ft, 4% down on the five-year quarterly average. At £23.80, net effective headline rents increased by 4.9% over the year to Q2 2016.
The Big Nine average headline rent rose 3.1% since Q2 2015 to £27.78, and the average rent free period dropped from 22 months this time last year to 20 months this time round.
Key deals in other cities included 63,000 sq ft to Direct Line in Bristol; 50,000 sq ft to AXA in Glasgow, and; 55,000 sq ft to an undisclosed public sector occupier in Cardiff.