Speculative office development underlines confidence in Birmingham economy
AROUND 90% of Birmingham city centre’s current office development pipeline is speculative – illustrating the high levels of confidence in the city’s future among developers and investors alike, property analysts have said.
In its newly published Birmingham Report, Knight Frank said the city’s reputation as one firmly set on a journey of transformation was continuing to attract interest.
The fact that no new Grade A office space has been delivered to the market since Two Snowhill and Five Brindleyplace in 2013, has further encouraged developers and their backers to get building, it concludes.
As a result, the current office development pipeline for the city looks extensive.
Over the next three years stock figures will be boosted through a mix of major refurbishment and ground-up new schemes. Some 90% of this total is speculative build, reflecting the fact that Birmingham is currently recording the highest level of occupier take-up across the major regional markets.
High quality refurbishments are leading the way. Of the projects started, Freshwater Group’s major renovation of 10 Temple Street is closest to completion. IM Properties’ redevelopment of 55 Colmore Row and Bruntwood’s renovation of 2 Cornwall Street will follow within the next few months.
These schemes combined will deliver 260,000 sq ft of vacant space to the market. A similar level of speculative space is due in 2017, headed by Legal & General Property’s refurbishment of the Lewis building.
With Evenacre’s 102 New Street refurbishment expected to complete in Q1 2018, a total of 579,000 sq ft of speculative Grade A space will come to market between Q4 2016 and Q1 2018.
In addition, Paradise Circus is now almost a year into its redevelopment, with work already underway on One and Two Chamberlain Square – the former set to be the new home of PwC in the city.
Meanwhile, with a £200m funding agreement in place, Ballymore and M&G’s Three Snowhill is going ahead. The 420,000 sq ft final phase of Snowhill will complete in 2019 along with the unveiling of Rockspring and Sterling Property Venture’s 26-storey 103 Colmore Row.
Jamie Phillips, a partner in Knight Frank’s Birmingham office agency team, said: “Whether it be high quality refurbishment or large-scale new build, the city clearly has a schedule of development which is aligned to appeal to indigenous occupiers and footloose inward investors.
“It is extremely encouraging that occupiers want to come here and be part of the Birmingham growth story and that developers are building the first class accommodation that they require.
“The skyline of Birmingham is ever changing, reflecting the tremendous momentum the city currently has.”
Investors – both domestic and international – have been quick to follow in the wake of the redevelopment.
In the last five years overseas capital has accounted for 30% of all office investment in the city.
The ULI’s annual Emerging Trends in Real Estate study ranked Birmingham as the sixth best location in Europe for investment and development opportunities in 2016, and fourth for expected increase in investment, higher than any other UK city.
Over the last ten years, office assets in Birmingham have attracted new capital from the US, Canada, Germany, France, Ireland, Hong Kong and Switzerland. The US and Germany have been particularly active, acquiring £1bn and £0.5bn respectively.
Ashley Hudson (left), head of Knight Frank’s Birmingham office and capital markets team, said: “What has become abundantly clear is that against a backdrop of higher asset prices in London, Birmingham is ideally placed to soak up capital.
“The continued weakness of sterling is likely to heighten overseas investment interest in Birmingham over coming months.”
