Birmingham office market remains buoyant says Snowhill developer
Register for free to receive latest news stories direct to your inboxRegister
Demand for office space in Birmingham is holding up, with the shortage of Grade ‘A’ office stock set to support rental growth, a new study has concluded.
The study, by property investor M&G Real Estate, reveals that the office market in UK regional cities appears resilient given continued lack of Grade ‘A’ space and limited new supply of high quality, modern office accommodation being developed in the short-term.
Office take-up is being driven largely by domestic demand, which has proven buoyant despite the ongoing Brexit process.
M&G’s Birmingham offices portfolio includes the £200m, 420,000 sq ft Three Snowhill – the largest speculative office development being constructed outside of London. It is due for completion in early 2019.
Its research paper concludes regional office markets such as Birmingham are being supported by major infrastructure projects, the regeneration of city centres and improved office stock with a greater emphasis on facilitating work life balance.
The conclusion is that all these factors suggest the occupational markets in UK regional cities should continue to fare well in the wake of the EU Referendum vote.
Aaron Pope, director, Asset Management at M&G Real Estate, said: “Birmingham is increasingly showing its appeal as an excellent location for occupiers. Its well-connected location in the centre of the country is underpinning exceptional demand and strong rental growth. M&G Real Estate’s investment in Three Snowhill is based on the robust demand amongst occupiers for quality office stock, and the growing need amongst staff for exceptional work facilities.”
The evidence would appear to be supported by the latest edition of GVA’s quarterly Big Nine research, which concludes the third quarter has been a busy one for Birmingham’s office market, with 402,000 sq ft of deals completed – making it the strongest period for two years.
While the Government’s commitment to the 240,000 sq ft, 3 Arena Central represents the largest single transaction, the GVA study concludes activity has been diverse.
There were six medium-sized deals over 10,000 sq ft and continued interest from the serviced office market, with Instant Offices completing three deals totalling 40,000 sq ft on Cornwall Street in the heart of the business quarter.
Birmingham remains a key focus for inward investment, with lawyers Hogan Lovells taking 23,400 sq ft at Ashby Capital’s Colmore Building and recruitment firm Allegis committing to 7,500 sq ft at CEG’s Alpha Tower – both fulfilling regional expansion requirements from London.
Further underscoring the current rush of activity, IM Properties’ 55 Colmore Row has set a headline rent of £33 psf, a peak not seen since the pre-recessionary period and one that GVA anticipates may increase.
George Jennings from GVA’s offices team, said: “This year continues to offer some interesting opportunities for the city, with requirement from HS2-affiliated companies driving strong interest in the serviced office market.
“The Government’s commitment to create a new hub for HMRC and the Department for Work and Pensions at Arena Central and inward investment from the professional services sector demonstrates how Birmingham continues to be seen as an appealing destination for inward investment.
“With a minimum of 150,000 sq ft of deals to complete in the last quarter of the year, total take-up for 2017 is likely to reach and in all probability, exceed 800,000 sq ft, making it the third best year for the city on record.”
He said currently, there was just over 300,000 sq ft of immediately available new Grade A stock, representing around one year’s supply, with a further 600,000 sq ft being developed speculatively at 1 and 2 Chamberlain Square and Snowhill, which will bring a further two years’ supply when these schemes complete in 2019.