Grade A supply dips after strong quarter for office market
The availability of grade A office space in Birmingham city centre has dipped after a relatively strong third quarter for lettings.
Even without the massive HMRC pre-let at 3 Arena Central, there were deals for more than 160,000 sq ft of office space done between July and September – which would have made it the best quarter for five quarters.
When the Government’s 240,000 sq ft is added in, it was the third-best quarter since 2008. Other notable deals included Hogan Lovells’ expansion in the Colmore Building and Savills taking 16,960 sq ft of space at 55 Colmore Row.
The third quarter saw the completion of the refurbishment of the Lewis Building, adding 113,000 sq ft. However grade A supply in the city centre was down 17% from the second quarter, at 372,850 sq ft.
Colliers International’s Sam Cooke said: “This scarcity of Grade A supply should be alleviated by the delivery of new office stock by the end of 2019, when Three Snowhill, 103 Colmore Row and One & Two Chamberlain Square are scheduled to come to market.
“The recently announced redevelopment of the 42-acre Birmingham Smithfield, the site of the city’s former wholesale markets, will also see delivery of over 3m sq ft of commercial space alongside 2,000 homes.
“And in Edgbaston, the city council has approved proposals for a £300m regeneration of a 10.7-acre plot along Hagley Road. The scheme, known as New Garden Square, which recently had outline planning consent granted by the city, could deliver more than 600,000 sq ft of office space and up to 400 apartments, so the outlook for 2019 and beyond is positive.”
The ready-to-occupy grade A space in the city centre market was as high as 750,000 sq ft in mid-2014, with total space exceeding 1.8m sq ft.
However total available space has been at or below the current level of 1.2m sq ft for the last two years.
Headline office rents in Birmingham remain at £32.50 per sq ft, following PwC’s pre-let at One Chamberlain Square last year.
Colliers is forecasting that figure to nudge upwards slowly, reaching £33 next year – 10 years after it last reached that level.
Secondary rents have performed more strongly over the decade. Having been at £19 per sq ft before the recession, headline figures surpassed that level in 2014 and are now at £22.50.