Developers must deliver speculative office space along the M42 corridor, or prospective tenants will look elsewhere, according to one of Birmingham’s leading agents.
Malcolm Jones, director of office agency at KWB, says the area around Solihull and Birmingham Airport is in danger of becoming a victim of its own success.
“I’ve been working in this office market for almost 25 years, and there’s never been a time when the pipeline of office space has been so close to empty,” he admits.
“The area’s largest employment location is Birmingham Business Park (BBP), but it’s so popular that its vacancy rate is down to just 6.8%, which – with several deals about to complete is not far off being full.
“There are no office schemes coming forward on a speculative basis at other sites along the M42, and it’s becoming a major strategic issue for the regional economy. If potential occupiers can’t find space here, they might well choose to go elsewhere.
“I think developers who believe in this corridor’s long-term merits could easily deliver a scheme of 80,000 sq ft on 20,000 sq ft floor-plates, and it would be snapped up as an HQ-style building, or they could bring forward smaller units, and they’d be equally popular.”
Jones says the warning signs have been flashing for the last 18 months, as sustained high demand for Grade A space combined with dwindling availability of space to drive up rents
The first quarter of 2019 saw the trend continue in the office market across the Solihull-M42 area, when 14 deals were completed, the best quarter for almost four years, but taking another 120,000 sq ft out of the pipeline.
“If there was a new-build scheme today it could command rents in the mid-to-late £20s, a level that not so long ago would have been associated with office space in the centre of Birmingham.” says Jones.
BBP contains 1.9m sq ft of space, and its long-term success as an economic magnet can be seen in the presence of 120 tenants, including such global brands as BT, EE, Fujitsu, Goodyear Dunlop Tyres, IMI, Nokia Siemens Networks, and Rolls Royce – and combined employment numbers of 7,000.
However, Jones says even that ‘well’ is finally running dry, with two new deals reducing the level of available stock to an all-time low.
“The British Heart Foundation has taken 10,000 sq ft at Compton House, on the Crescent, and another new occupier to the area has taken more than 13,000 sq ft in the adjacent building.
“I’m not pessimistic, because BBP’s concept of delivering Grade A space with a wide range of amenities, in a landscaped country park setting, is proven – and it’s since been adopted by IM Properties at Blythe Valley Park – so the attraction of the M42 corridor is evident to all.
“However, I really hope that over the summer, we’ll see one or two developers look to gain an advantage over their peers in this very competitive market, by revealing plans for speculative office space.”