Office supply crisis could hit Birmingham

A SUPPLY crisis could be looming in the office market in Birmingham, according to new research.

The absorption of office stock in the second city is at the highest it has been for five years, says the newly released ‘Net Stock Absorption Survey’ from Colliers International.

Total occupancy across central Birmingham rose by 221,825 sq ft during 2010, leaving vacancy rates for the city at just over 18% – the lowest for two years.

In total, grade A additions to overall stock over the past five years stand at 1.6m sq ft, which represents about 10% of current total stock, the reports says.

The city has seen growth over the last decade with 5.1m sq ft added since 2000, compared to 3.9m sq ft in the 1980s and 90s combined.

Birmingham is unlikely to see this kind of growth in new space again for some time, the research suggests.

Craig Satchwell, head of the office agency at Colliers in Birmingham, said the completion of the Cube signalled the end of the current speculative development cycle.

If absorption of office space continued at the five-year average, the city was at risk of having little new Grade A stock to accommodate large requirements by 2013, he said.

“For the short to medium term, with the exception of Two Snow Hill, there are few, if any, deliverable new build schemes in the central office core,” Mr Satchwell said.

“Proposed schemes such as Arena Central and 103 Colmore Row are predicated on pre-lets.

“However, with typical large grade A lettings in Birmingham being 20,000 to 40,000 sq ft, both developers are likely to need a handful of these to have any hope of getting funding in the current market.

“Landlords and developers need to look at opportunities to recycle existing stock to accommodate new inward investors to the city.”

Referring to grade B office space, he added: “As a proportion of the wider office market, good quality grade B space accounts for just 8% of available space. With current availability around 223,000 sq ft, it won’t take much for this to start diminishing.”