Refurbished buildings offering better value terms and lease flexibility have prospered in a quieter quarter in the Birmingham office market, according to Birmingham-based independent commercial property agency KWB.
Writing in KWB’s Birmingham City Centre Office Market Research – Quarter 2 2017 Report, Mark Robinson, Director in KWB’s Office Agency Team, says central Birmingham office buildings Alpha and Cornerblock continued their lettings success into the second quarter of 2017 by being more competitive in their lease negotiations.
Bruntwood’s Cornerblock topped the Q2 tables with lettings of just over 17,000 sq ft to Beazley Insurance and to Finance for Small Business, adding to the largest Q1 letting of nearly 23,000 sq ft to Arcadis Consulting. Similarly, the letting of 14,200 sq ft to West Midlands Combined Authority at CEG’s Alpha continued its Q1 success of total lettings of 35,476 sq ft.
Mr Robinson says: “Both buildings have been refurbished to a very high quality to suit modern occupiers. Bruntwood, particularly, has taken an aggressive approach to lease negotiations by offering more flexible leasing terms than seen elsewhere on similarly specified accommodation in the city core.
“Cornerblock is also understood to have two further deals under offer, totalling 24,000-25,000 sq ft, which are likely to complete in Q3. These are thought to be HS2-related, and to feature shorter lease breaks than the five years which Beazley agreed.
“For companies involved with HS2 that are being signed up on short-term contracts, for what will be a seven year build, this is very appealing because, although their contracts may get extended, they will not be tied into a long-term lease if contracts are not renewed.
“We are likely to see Q3 activity around Cornerblock, Alpha, and 10 Temple Street which also has benefited from a high specification refurbishment programme.”
Q2 office take up in the second quarter of 2017 totalled 112,263 sq ft in 27 deals, at an average of 4,158 sq ft, bringing the total to just over 250,000 sq ft for the first half of the year.
Mr Robinson continues: “Since the first half of 2016, there has been a lack of lease events to drive larger ‘hero’ office space transactions. Larger occupiers are not in the habit of moving for moving’s sake, and there aren’t many significant rises in headcount to speak of. Instead, we see landlords taking an aggressive negotiating position with their existing tenants to retain them in the property.
“Despite there being much in the way of office stock coming on line in 2018 and beyond, there is only a modest amount that is immediately available to move into today. So this, in itself, may be restricting deal numbers, with some occupiers wanting longer decision making periods to consider all their options.”