Birmingham: ‘a top tier office location’

Goldman Sachs’ move to Paradise was Birmingham’s biggest office deal of the year, as the firm took 110,000 sq ft at One Centenary Way.

Birmingham’s office market take up in the final quarter of the year totalled 210,348 sq ft in 27 deals, the biggest being the Global Banking School (GBS) taking 43,766 sq ft in Norfolk House. The deal, orchestrated by AY and Colliers, moved GBS into the ground, first and third floors of the property, owned by London Scottish.

When added to the 88 deals totalling 482,352 sq ft recorded in the first three quarters of the year, the 2022 year-end total take up amounts to 692,700 sq ft in 115 deals.

This compares with:
656,735 sq ft in 94 deals for 2021
520,810 sq ft in 50 deals for 2020
780,095 sq ft in 116 deals for 2019
754,129 sq ft in 113 deals for 2018

The Birmingham Office Market Forum said: “In a year where the market was still impacted by pandemic restrictions at the outset, it is encouraging that further improvement to both deal numbers and take up floor areas was recorded. The major Inward Investment by Goldman Sachs has been a significant endorsement of Birmingham as a top tier office location.

“This also shows further evidence of a return towards longer term average take up levels, with market sectors such as Education and Life Sciences now factoring with
increasing frequency.

“A number of transactions didn’t make it over the line in time to be recorded but remain in solicitors hands and so we anticipate a reasonably strong start to 2023, despite the prevailing winds of the general economy”.

Alex Tross, commercial director of Centrick said: “Despite a year of political and economic unrest, the Birmingham office market continues to show positive signs of post pandemic recovery.
 
“The overriding trend this year has been the occupier ‘flight to quality’. Many occupiers are taking less space, having adopted various forms of hybrid working, but they are absolutely focused on securing the best possible accommodation. Great office space amplifies their culture, attracts existing staff back to the office and crucially, helps them stand out in the war for talent.
 
“Taking less space allows for businesses to spend more per sq ft in pursuit of that quality and that has allowed for rents to grow. Higher rents may sound like a negative if you’re a tenant, but the net position may be protected if they take less space and higher rents enable landlords to afford the space improvements tenants want in a world where build costs have skyrocketed.
 
“Higher rents also allow landlords to accept shorter lease terms which is a result of tenants needing more flexibility in uncertain times”.

Ed Siddall-Jones, director of property consultancy Siddall Jones said: “We saw a lot of clients relocating from secondary space, and improving the quality of their office accommodation. The reason for that is to get bums on seats following COVID as a lot of businesses lost workforce to people working from home.

“Now, they’re taking better quality space and bringing in luxuries like decent coffee machines, pool tables for example in a bid to get people back to the office.

“Occupiers are also paying more price per square foot at the moment. We have seen an increase in your grade A’s and around Colmore Row. We’ve seen a lot more international businesses move to Birmingham which has kept fueling growth and giving confidence to what price per square foot can be can be quoted, charged and secured.

“The secondary market is what is suffering at the moment, mainly because of being able to meet the new energy performance requirements”.

Ashley Hudson, partner and office head at Knight Frank’s Birmingham office said: “2022 for the Birmingham Office Market was a tale of 3 acts with Q1 full of spring and energy as we continued the strong come back from Covid followed by a Q2 and Q3 in which, due to the well reported external factors, some occupiers and most investors paused and to take stock. Q4 meanwhile saw a return to normal activity levels on the occupier side with investors still waiting in the wings.
 
“Generally, throughout the year occupier activity has remained strong in the face of all the headwinds and rents have at the top end grown by 10-15% in 12 months.

“The flight to quality has continued and whilst occupiers are, in general, taking less space it is of a higher quality and price point – quality and amenity and ESG outweighing cost psf.  Proving this trend, almost 70% of transactions during 2022 were brand new Grade A space.

 “The fundamentals of the market are changing and no more can a new grade A building expect to attract occupiers just for being a new building.  Whilst occupiers are willing to pay more rent, they are equally more demanding with developments that offer the quality, amenity, ESG and the flex being successful. 
 
“From an investment perspective, our clients are telling us that the UK plc remains an attractive prospect and one they wish to invest in and we expect increased activity in 2023”.