The West Midlands is in an excellent position to take advantage of the Midlands Engine initiative, but speculative development is key to its success, according to Lambert Smith Hampton (LSH).
The national property consultancy’s Midlands Engine office market report states Birmingham is benefiting from “concerted infrastructure investment and development”, cementing its status as a first-class business destination.
The city has experienced outstanding levels of activity and despite market uncertainty surrounding the EU Referendum result, Birmingham is well placed to secure future inward investment from London relocations and overseas occupiers.
Meanwhile, the Friargate regeneration in Coventry, which will see up to 2 million sq ft of new office space as well as enhanced public realm, railway station and surrounding areas, promises to transform the offer, should be pivotal in restoring its reputation as a desirable office occupation.
Alex Tross, director of office agency at LSH Birmingham, explains: “The shock result of the EU Referendum has come at an unhelpful time, but the fundamentals to support development are robust.
“Few occupiers have the luxury of being able to wait 12–24 months to have an office built and we need to provide the buildings that can satisfy immediate requirements so that the economies in our towns and cities can flourish. Where viability is marginal, we need to be seeking innovative ways to ensure much needed development is realised. If we don’t, occupiers will be forced to look elsewhere.”
Grade A supply will be boosted in Birmingham at the end of 2016, thanks to waves of much-needed new development, while early 2017 will see 350,000 sq ft of premium office space delivered with the completion of 55 Colmore Row, Cornerblock at Two Cornwall Street, and Crossway. These could potentially push prime headline rents to £32.00 per sq ft in 2017.
In Coventry, total availability has fallen 37% from its 2010 peak to stand at a ten-year low of about 550,000 sq ft, which translates into just over two years of supply. However, Friargate has the potential to drive rents to more than £20.00 per sq ft in the future.
Out of town, the most likely development to come forward in the near future is phase 2 of Abbey Park, Stoneleigh, which has planning permission for 150,000 sq ft across five buildings. Unless an occupier is confirmed, it is unlikely that it will go ahead as a speculative development, says the report.
Alex adds: “Those developers who are willing to grasp the right opportunity and bring forward new stock will be the winners. If the private sector fails to deliver, the public sector can, of course, use its regeneration powers or strength of covenant to drive development forward.”