Birmingham office market set for record-take-up and rentals
Birmingham’s office market is poised to outperform other regional cities, with a booming jobs market contributing to increasing levels of take-up resulting in higher rents.
Between 2019 – 2024, CBRE claims more than 15,000 jobs are predicted to be created in the city. Around 35 per cent of those will be in professional and business services, the creative industries, real estate and public sector.
“In other words, desk jobs,” said Ashley Hancox, CBRE’s head of office advisory and transaction services for the UK regions. “We calculate that Birmingham will require 1,300,000 sq ft of state-of–the-art office space to accommodate these workers.”
These roles will be generated as a result of regional mergers and acquisitions, consolidation and new businesses coming to the city, attracted by cost effective talent and a desire to operate from a key transport and amenity hub.
Demand for office space in the city is already encouraging. The city boasts the best development pipeline of any regional city, with two million sq ft of space available within the next 12 months equating to a two-year supply.
Government departments are among those looking for a new home in Birmingham.
Hancox said: “As part of the GPU Hubs programme, HMRC and the Department for Work & Pensions have already acquired around 340,000 sq ft, but these lettings are just the tip of the iceberg. The government has aspirations to consolidate and improve the efficiency of their property stock, reducing the costs and their exposure to London. Birmingham is unrivalled in terms of connectivity. More deals will come.
“In addition to public sector requirements, corporates such as BT and professional services firm Atkins are seeking to consolidate their operations in the city.”
Hancox also believes there is considerably more headroom in the flexible office market sector. In CBRE’s recent occupier survey, half of those interviewed said serviced or furnished offices were their preferred format for the future, with 46 per cent confirming they would be using flexible space within the next three years.
“We anticipate that flexible office space will account for around 15 per cent of total stock in the foreseeable future. Even with the recent take-up by WeWork and IWG, flex offices currently account for just six per cent of the office market in Birmingham. There are a number of new operators targeting the city and it won’t be too long before they too commit to space.
“Notwithstanding this trend we do still see a need for core occupational space supplemented by more flexible solutions,” he added.
Increased demand for new space will translate into higher rentals, with CBRE predicting annual growth and the high watermark of £40 per sq ft being breached within the next five years.
Hancox said: “The market fundamentals are robust. The anticipated growth in the jobs market, rental growth and occupier demand, reinforced by the retention of graduates and in-migration of a well-qualified workforce, mean the outlook for the city is very positive.”
Developers and landlords are having to adapt their products, however, as occupiers increasingly expect more from their space.
Nick Wright, senior director, strategic advisory at CBRE: “As the jobs market in Birmingham grows we are seeing an increasing focus on how buildings and offices help improve staff efficiency and productivity.
“Labour and skills shortages as well as employee engagement and talent retention are now boardroom issues. Buildings are fast becoming the representation of an organisations’ corporate goals and selecting the right building is now a decision made not just by the property manager, but heads of human resources, brand/marketing and security. They are all influenced by the building characteristics, services and amenities and this is something landlords now have to be mindful of.”