Confidence high as Birmingham continues record levels of development
Birmingham is continuing to maintain its record-level of development across the city centre, as confidence in its commercial property market remains buoyant.
The latest Deloitte Real Estate Birmingham Crane Survey, now in its 16th year, shows construction levels remain resilient with 24 new starts breaking ground in 2017.
This includes four new office schemes adding to the city’s office development pipeline of 1.4 million sq ft. Confidence in developing speculative office space has grown as pre-letting activity continues with 49% of space under construction already let.
Edwin Bray, partner at Deloitte Real Estate and author of the crane survey, said: “Over the past three years Birmingham has witnessed a resurgence in development and whilst many commentators expected to see a downturn in activity due to political and economic uncertainties, it is quite the opposite.
“Investment in transport links and the much-anticipated HS2 have led developers to be more bullish in their approach and seize the opportunity to significantly refurbish and redevelop existing stock. This has led to an increase in speculative builds such as the office scheme at Snowhill.
“The city is quite rightly capitalising on its position and this renewed confidence has been further bolstered with the election of the new mayor, the promise of Devo 2 and the forthcoming 2022 Commonwealth Games. HMRC’s 25-year lease at Arena Central echoes the confidence of businesses investing in modern, flexible workspace for its employees with Birmingham the destination of choice.”
Construction activity across the city’s residential sector has amplified, with 13 new residential schemes starting construction in 2017, up 30% on the previous year. This is set to deliver 2,500 new units in 2018 alone.
“The confidence in the city centre residential market highlighted in last year’s report has gathered pace and we are now seeing not just competition to secure viable sites, but also a race to complete to meet the demands of first time buyers and investors,” added Mr Bray.
“At present there are 4,078 residential units under construction across the city, with several re-designing Birmingham’s skyline. The 31-storey apartment block at the junction of Sheepcote Street is the tallest new building in the city, but this will be eclipsed by the 42-storey building at 2one2 Broad Street.”
For the fourth successive year there has been considerable development activity in student accommodation with four new schemes – a positive sign that Birmingham is becoming a place to live, work and learn.
The hotel market in Birmingham has fared well in 2017, with occupation rates remaining high (75%). One new scheme started development in the past 12 months and the research also showed 334 new hotel rooms were completed in 2017, the highest volume since 2013.
However, although construction levels remain at a record-high for office development and there is a positive upturn in both residential and student accommodation, by contrast activity levels involving the development of education space, medical related development and research facilities have fallen back.
For the second year running, activity in retail has also been subdued with many developers focusing on large mixed-use developments.
“The construction industry has battled with rising costs and dwindling skills, but Birmingham is witnessing a renaissance and is delivering. The development pipeline is healthy and what is exciting is the breadth of the development spread throughout the city,” added Mr Bray.
“One of the most exciting prospects yet to come is Smithfield which will provide 3 million sq ft mixed commercial space and 2,000 new homes. Couple this with sites such as New Monaco where another 1,000 apartments are planned and the outlook for redevelopment and regeneration is transformational.”
The survey will make pleasant reading for the city as it heads into the latest MIPIM property exhibition in March.
However, the survey does not include the impact of the collapse of construction group Carillion, which was developing the new One Chamberlain Square building as part of the Paradise development.
There are also five cranes standing idle at the site of the new Midland Metropolitan Hospital in Smethwick.