The final quarter of 2017 broke the record for office transactions in Birmingham in a single three month period, as total take-up for the Birmingham office market in the year topped 1 million sq ft for the first time in the last decade, according to Birmingham-based independent commercial property agency KWB.
Q4 2017 delivered a total of 354,530 sq ft across 49 transactions thanks to increased flexibility in the market, as a result of an increase in serviced and managed office space, and landlords prepared to do deals, says Mark Robinson, Director in KWB’s Office Agency Team, writing in KWB’s Birmingham Office Market 2017 Annual Review.
Inward investment and the consolidation of regional offices continued to drive the corporate market in Q4 2017, as during the rest of 2017, with the RICS taking 30,808 sq ft at 55 Colmore Row in a relocation from Coventry.
However, Mr Robinson warns that the amount of high quality, readily available office space is being quickly eroded, with no new build office space available until 2019 when nearly 900,000 sq ft will be completed.
He says: “A shortage of grade A office space in 2018, particularly for occupiers requiring over 10,000 sq ft on a single floor, means there will be fewer options available to them, with a consequent reduction in transactions. Some will be accommodated in the new serviced office space which has boomed in 2017, but others may have to stay put, or look outside of the city.
“This pending, though temporary, shortage of quality office space has allowed commercial property owners to become more assertive in their marketing and negotiation strategies over 2017. Rents for the highest quality new build office space are slowly increasing. It is expected that the top of the Birmingham office market will achieve rents of £34 per sq ft by the end of 2018, and £35 per sq ft by the end of 2019.”
Serviced and managed office providers accounted for 20% of the square footage transacted in 2017, as opposed to only two per cent in 2016, with Regus alone taking nearly 110,000 sq ft in Q4 at The Crossway and the Lewis Building.
Mr Robinson says: “Serviced and managed offices are now regarded as ‘cool’ by millennials, as a more permanent, rather than a start-up, or interim arrangement. The approach by different providers, and in different locations, is also now much more tailored. Regus is differentiating its offering between The Lewis Building which is likely to be more traditional HS2 contractor-led space, and The Crossway which will offer a more relaxed ‘jeans and T-shirts’ office environment, catering for a different area of the market, similar to Alpha Works.”
According to Mr Robinson, as in 2017, inward investment and the consolidation of regional offices for corporate occupiers will be behind the largest lettings in 2018, underlined by engineering consultancy WSP taking 47,000 sq ft in The Mailbox in Q1 2018.
He says: “Quality, suitability and flexibility will be the priority of most ‘switched on’ commercial property owners, as they continue to be the key demands of the market.”
