While office activity in Birmingham may have got off to a slow start in 2017, leading real estate adviser GVA believes that the second half of the year will see a significant improvement.
The company has just released its latest Big Nine report, which reviews quarterly activity in each of the country’s nine largest regional cities.
Activity in Birmingham city centre represented 112,263 sq ft, down 38% on the five year quarterly average, with the out of town market seeing a decrease of 19% from 92,822 to 80,011. The out-of-town market, however, still commands the highest average rental values of all those covered in the Big Nine, at £23.50 per sq ft.
Charles Toogood, Senior Director in the Midlands Offices team, advises that despite a slow start to the year, there are still transactions taking place with normal levels of sub-5,000 sq ft activity and an encouraging amount of Grade A space either recently transacted or under offer.
He said: “It’s difficult to put these figures into context as there has been a good deal of positive activity in the market over the first half of the year with Bruntwood’s 110,000 sq ft Cornerblock already 40% let, with a further 40% under offer and a further two floors under offer at L&G’s Lewis Building, all prior to completion of their respective refurbishment programmes.
“Greater caution from the professional and financial services firms, which traditionally are big drivers of take-up in Birmingham, caused by political uncertainty and Brexit has certainly resulted in things being more subdued, but this gap in the market is being back-filled by increasing interest from engineering and construction firms, and the serviced office market.
“The level of pent-up demand is encouraging and we are anticipating a point in the second half of the year where newly completing high quality refurbished space and this demand will meet.”
It is expected that there will be an increase in activity in the second half of the year, with an anticipated letting of 240,000 sq ft to the Government Property Unit and a further 50,000 sq ft expected to be taken by the serviced offices sector.
Charles Toogood added: “The uplift in interest from serviced office operators in particular is interesting as this is a demonstration of an increasing desire from occupiers for greater flexibility, which is both symbolic of changing occupancy patterns but also symptomatic of challenging occupier conditions.
“Demand for serviced space has been further bolstered by the requirements from HS2 which have seen 30,000 sq ft of managed office space taken so far and a further 50,000 sq ft is expected to transact in Q3 of this year following the awarding of contracts for the project.”
Nationally, city centre and out of town activity in the second quarter of the year was six per cent and one per cent above their respective five year quarterly averages (at 1,397,000 sq ft and 838,000 sq ft), driven by significant lettings in the Edinburgh and Manchester markets.
In Edinburgh, the Government Property Unit agreed a pre-let of 189,000 sq ft at the New Waverley development and State Street Bank completed on a 65,600 sq ft pre-let at the Old Town’s Quartermile 3.
In Manchester, co-working company We Work took its first space outside London with 55,800 sq ft at No 1 Spinningfields and are soon expected to turn their attention to Birmingham.
Carl Potter, National Head of Offices at GVA, said: “Take-up activity is up on Q1 and is 4% above the five year average, thanks to the welcome return of larger deals to the Big Nine office markets. Encouragingly, there are also significant inward transactions among the large deals with Australian financial services firm, Computershare, creating new jobs in Edinburgh as well as Swiss distribution company, Distrelec, choosing Manchester for their European headquarters.”
