Central Birmingham has reported its strongest quarter of take-up since Q2 2017, as the third quarter office take-up totalled 402,076 sq ft in 25 deals, according to Colliers International’s latest Quarterly Birmingham Office Market Snapshot.
“Q3 2017 take-up was boosted by Central Birmingham’s largest pre-let in a decade with the UK Government committing to 238,988 sq ft of space at 3 Arena Central on a 25-year lease,” said Sam Cooke, Senior Surveyor, National Offices, Colliers International. “The average deal size was 61% higher than in 2016. When added to the 248,466 sq ft of deals done in the first half of the year, Birmingham office take-up has reached 650,542 sq ft across 81 transactions, putting the market on track to exceed the 2016 total by the end of the year, and meeting the long term take-up average.”
Headline office rents in Birmingham remain at £32.50 psf, following PwC’s pre-let at One Chamberlain Square in the previous year. Prime rents, however, are expected to exceed the record £33.00 psf in the next 12 months, as key Grade A office schemes complete. Due to low levels of supply, secondary rents are also likely to see an upward movement as the current £22.50 psf is forecast to increase to £24.50 psf by 2021.
Occupier demand for Central Birmingham in the first nine months was dominated by the public sector (42%), followed by business services (29%) and media & tech (6%). Other key professional service sectors also remained active, evidenced by recent transactions including; law firms Hogan Lovells and 3PB Barristers securing 23,388 sq ft and 4,901 sq ft respectively in The Colmore Building. Colliers’ report also shows an uplift in interest from serviced office operators.
Sam Cooke explains: “Lettings such as the Instant Group taking space at the newly refurbished Cornerblock show increasing desire from occupiers for greater flexibility, which is both symbolic of changing occupancy patterns but also symptomatic of challenging occupier conditions. With the recent announcement of the key HS2 contractors, the Birmingham office market is likely to witness more contract-driven demand for office space in the coming quarters.”
Q3 2017 saw the refurbishment of the 113,000 sq ft Lewis Building, bringing Grade A supply to 678,738 sq ft in the Birmingham office market and 372,850 sq ft in the city centre. Following completion of several refurbishments earlier this year, which boosted Grade A supply and increased vacancy rates to 11%, Grade A availability in the city centre has fallen again by 17% quarter on quarter, while vacancy currently stands at 9%.
Cooke concluded: “This scarcity of Grade A supply should be alleviated by the delivery of new office stock by the end of 2019, when Three Snowhill, 103 Colmore Row and One & Two Chamberlain Square are scheduled to come to market. The recently announced redevelopment of the 42-acre Birmingham Smithfield, the site of the city’s former wholesale markets, will also see delivery of over 3 million sq ft of commercial space alongside 2,000 homes. And in Edgbaston, the city council has approved proposals for a £300 million regeneration of a 10.7-acre plot along Hagley Road. The scheme, known as New Garden Square, which recently had outline planning consent granted by the city, could deliver more than 600,000 sq ft of office space and up to 400 apartments, so the outlook for 2019 and beyond is positive.”