Solid start to the year for take-up in Birmingham’s office market

West Midlands Trains' move into 134 Edmund Street was one of the biggest office deals of the quarter

Birmingham’s office market has enjoyed a healthy start to 2018, fuelling expectations that 2017’s record 1m sq ft take-up might not be an unachievable target.

An update from the Birmingham Office Market Forum (BOMF) described the figures as “relatively encouraging” after the record take-up of 1m sq ft achieved in 2017. That was driven by deals for 750,000 sq ft being agreed in the second half of the year, led by HMRC’s 240,000 sq ft deal for 3 Arena Central.

2018’s first quarter total of 148,483 sq ft was in line with the long-term trends, landing almost exactly in between the five and ten-year averages for the period.

BOMF chairman Jon Carmalt, director office agency at JLL, said: “It’s been a reasonable start to the year, in line with the long-term averages, with good occupier interest being shown in developments on site such as Three Snowhill. However Brexit and the political climate has led to a pause in key relocations and significant inward investment, and decisions are taking longer to be made.”

Despite the macro-economic backdrop, a combination of the investment being put into Birmingham, led by HS2 and the Commonwealth Games, major schemes on site, the continued expansion to the city’s flexible office market and the usual market churn are expected to ensure 2018 is a good year for the city’s office market.

Theo Holmes, director in the office agency team at CBRE in Birmingham, believes that 2017’s 1m sq ft take-up “could be the new norm”.

He said: “It’s the pipeline of enquiries that is particularly encouraging.

“The government is continuing to ship civil servants out of London, there are at least five requirements for serviced operators in play, inward investment and north shoring markets have never been stronger. There are also a handful of law firms with looming lease expires on the hunt for new space.”

The reduction in existing Grade A stock, which is now less than one year’s worth of take-up, and the only new Grade A space to come to the market this year is 27,000 sq ft at 9 Brindleyplace.

Holmes expects pre-lets to “dominate” take-up this year, and also forecasts 2018 as “the year rents move above the £33 per sq ft pre-recession high”.

Charlotte Fullard, senior surveyor at Lambert Smith Hampton, agrees that the lack of Grade A stock is causing changes in the market.

She said: “As demand and take-up increases, supply is often constricted. This is particularly evident at the top-end of the market, with current Grade A/new build supply not due to be ready for occupation until late 2019 and beyond.

“This is, however, having a positive effect on existing stock, with a strong flight to quality being demonstrated by occupiers and driving landlord investment in the refurbishment of existing stock across the city, with a number of high quality refurbishments coming to the market.”

The Birmingham office market “remains in very good shape”, said Marcus Hayes, managing director of Bespoke Office Space Solutions, but he highlighted how the strength of the market in the core city centre may push some companies to its edges.

“One of the main challenges for the market is the lack of cheaper/economical office space. Occupiers seeking more functional office space may need to consider fringe locations,” he said.

In the previous 10 years, the first quarter has recorded the lowest take-up of the year four times and the second-lowest four times.

The largest deal in the period was WSP taking 46,100 sq ft at The Mailbox, followed by West Midlands Trains signing up for 21,743 sq ft at 134 Edmund Street. In total there were 22 deals during the three months.