The Birmingham city centre office market recovered in the first quarter of 2017 back to normal Q1 levels, with headline rents on the best quality, new Grade ‘A’ office stock set to hit the pre-2008 recession high of £33 per sq ft, according to a leading West Midlands office agent.
Nigel Tripp, Director at Birmingham independent commercial property agency KWB, says that with office space transactions in the first quarter of 2017 totalling 139,000 sq ft, more than 30,000 sq ft over total transactions in each of the third and final quarters of 2016, the second half of 2016 is rapidly becoming a blip in the market rather than the beginning of a downward trend.
He says: “The first quarter of 2017 was very much a par with that of 2015. It was Q1 2016 with its large lettings to PWC, Pinsent Masons and DAC Beachcroft that was unusual.
“The rest of 2017 looks set fair, so even with the highest level of office development underway in Birmingham city centre for 15 years (1.4 million sq ft), we should see top quality grade A space match the record pre-recession rents of £33psf, as we anticipate some significant lettings in the coming months. The much reported HMRC requirement will see a letting of 200,000-300,000 sq ft and we also expect the HS2 halo effect to strengthen.
“We’ve also seen several investment purchases, including that of Brindleyplace offices by HSBC Alternative Investments, with HSBC themselves being set to move into adjacent HQ offices at Two Arena Central, currently under construction.”
According to KWB’s analysis of Q1 Birmingham office lettings the average transaction size was around 4,500 sq ft.
Mr Tripp continues: “With HS2 we are going to see even more demand for offices of under 5,000 sq ft, as more professional advisers look to take space in the city. There is also still a strong demand for small office freeholds in the city centre among business owners looking to take advantage of the tax benefits of Self Invested Pension Schemes and Small Self-Administered Schemes (SSAS), historically low interest rates, and banks willingness to lend.”
KWB was named as the West Midlands’ most active office agent for the second year running by Estates Gazette Interactive (EGi). It is presently acting on a number of prestigious office buildings in Birmingham, including 10 Temple Street and Cobalt Square.