The take-up rate of Grade A office stock in Birmingham city centre is set to hit 225,000 sq ft, according to predictions by Colliers International.
The firm’s latest Net Stock Absorption Survey shows the city centre has enjoyed its highest quarterly take up for nine months, with recent high profile lettings to The Ministry of Justice (38,000 sq ft at Axis, Holiday Street) and Deutsche Bank (27,600 sq ft at Baskerville House).
Stock absorption – that is, the difference between take-up and stock returning to the market – is also improving, with circa 120,000 sq ft of office space in the city’s central business district absorbed in the first half of this year, compared to around 60,000 sq ft in the last half of 2010.
As a result, the availability of Grade A office space in the city centre has now fallen for the third half year in succession, with current new build Grade A (2007 – 2010) vacancy levels at just 4.5 per cent of total stock.
Craig Satchwell, a director and head of the office agency team at Colliers International’s Birmingham office, said: “Grade A vacancy is now at is lowest level for three years. Worryingly, there is just one scheme with a speculative element currently on site – Hines and Ballymore’s Two Snowhill, which won’t be completed until 2013.
“With Grade A take-up in the city centre anticipated to average 250,000 sq ft over the next three years, occupiers with a medium-longer term requirement will have an extremely limited choice indeed.”
A number of the city’s indigenous office occupiers are set to examine their space requirements over the next couple of years. PricewaterhouseCoopers’ lease expires in 2014, while RSM Tenon, Grant Thornton and VAX have all committed or are close to committing to acquire more than 100,000 sq ft of new space between them.
While the development of further speculative space seems unlikely, Mr Satchwell says the opportunities lie in refurbishing existing space.
Mr Satchwell said: “Between now and 2016, 1.1m sq ft of office space will come under review due to lease events. This is equivalent to just over three years’ of typical Grade A take-up.
“In the absence of speculative development occupiers are either going to renew and refurbish their existing office accommodation or consider pre-let schemes such as Paradise Circus.”
Whilst Grade A absorption continues apace, the Colliers International report reveals that overall, available office stock in the city centre has risen, driven up by the release of poor quality Grade C space on to the market.
The outlook for city centre rents remains static, at £27.50 per sq ft.
“With occupier demand now building, we expect to see some movement in rents next year,” said Mr Satchwell.