Birmingham sees uptick in Q3 office market activity with largest UK city centre investment deal

Birmingham has seen an uplift in office market activity for Q3 while the city was also home to the UK’s largest city centre investment transaction, a report has revealed.

The quarterly Big Nine office market update for Q3 2020 shows an uptick for the city compared to Q2, in spite of the pandemic.

Though an increase, transactional activity has remained subdued during the quarter, as take-up amounted to 79,800 sq ft in the city centre and 39,700 sq ft out-of-town – 55% below the ten year quarterly average.

German investor Union’s £105m purchase of 55 Colmore Row from Nuveen Real Estate was the largest deal.

In addition, the sale of 1 Colmore Square to Oval RE, completed for £86.75m in October.

Activity also comprised several medium-sized professional and financial services leasing deals, the largest being 17,800 sq ft at Two Chamberlain Square, Paradise by law firm Knights.

Accountants, Mazars, also leased 11,800 sq ft at the development.

Carl Potter, principal and managing director of the Birmingham office at Avison Young, said: “It’s encouraging to see that our predictions for a Q3 uplift in office market activity in Birmingham were realised, albeit subdued, reflecting the impact COVID-19 is still having on occupier confidence and decision making.

“While transaction levels remain low due to uncertainty over medium-to-long-term space requirements, we are seeing a continued focus on quality, which bodes well for the City’s new developments.

“Birmingham is far from lifeless, and with prime space entering the market and a number of high-profile deals in the pipeline, the city is in a good position heading into Q4.”

This bodes well for the 377,000 sq ft of immediately available grade ‘A’ space in Birmingham city centre. Recently completed developments at 3 Snowhill and Two Chamberlain Square – as well as two speculative buildings under construction at 103 Colmore Row (228,000 sq ft) and 1 Centenary Way, Paradise (280,000 sq ft) – offer potential occupiers class-leading commercial real estate in the heart of the city’s business district.

Deals in the pipeline continue to indicate a solid start to Q4 for Birmingham.

Charles Toogood, principal and managing director, national offices team at Avison Young, said: “As a number of occupiers look to rationalise their portfolios, a ‘flight to quality’ is emerging, as businesses consider taking less but better-quality space. This is promising for Birmingham as new grade A developments become available alongside the continued construction of key office schemes in the heart of the city.

“With working practices so closely under the microscope over the last few months, as we move forward to the new normal, it is becoming clear that the office environment will likely pivot from process, to more about interaction, collaboration and innovation.”