Q4 shock for office take-up in Birmingham
OFFICE take-up in Birmingham dropped off sharply in the last quarter of 2010, according to the latest ‘Property Times’ report by DTZ.
The office market fell 43% in Q4 2010 after an exceptionally strong Q3, says DTZ. The drop was most apparent in Birmingham, Edinburgh, Manchester and Glasgow, but the real estates services firm said this compared to some exceptional deals in Q3. These included 107,000 sq ft at Calthorpe House, Birmingham, let to medical company The Binding Site.
Martin Davis, Head of UK Markets Research at DTZ said: “Aggregate regional office take-up may have fallen 43% in Q4 2010 but a series of exceptional deals over the year, particularly in Q3, meant that take-up for 2010 was 18% up on 2009 and even slightly above the long-run average. This exceeded our initial expectations at the beginning of 2010, given the weak economic backdrop. Most notable was Manchester, where the 2010 annual take-up was over 1.3m sq ft, the highest we have on record for the city.”
IN Birmingham, of the 105,000 sq ft that transacted in Q4, there were a small number of notable grade A deals, totalling 20,000 sq ft (Figure 2). In the largest individual deal, Hymans Robertson took 8,000 sq ft on the 7th floor of 45 Church Street. Aldermore Bank also took 4,000 sq ft on the 3rd floor of 35 Newhall Street. These deals underline the trend of recent quarters, where tenants have taken only part floors of grade A properties.
DTZ said prime headline rents remained unchanged in Q4 at £27.50 per sq ft though prime is quite thinly traded and there are few buildings in the city with space available that meet this definition.
Regional office take-up is set to fall in 2011, with fewer, large exceptional deals likely to transact. Lack of public sector demand will mute activity in some markets over the medium term. DTZ predicts that a severely limited development pipeline will mean that grade A availability will continue to fall, reducing generous incentives in some locations and pushing up prime headline rents.
The report observes there was not the surge in investment activity in the key regional markets in Q4 2010 that characterised the final quarter of 2009. A lack of prime product kept estimated prime office yields across all key regional cities stable in Q4.
David Tonks, Senior Director of office agency at DTZ in Birmingham, said: “The diverse make up of demand for office space in Birmingham city centre suggests there will be activity in most sectors of the market during 2011. But new supply brought to the market will keep overall availability near to record levels. There are, however, clear signs that occupiers with specific budget and size requirements may face a limited choice of accommodation towards the end of 2011.”
