SMEs hit by Birmingham office shortage

A dearth of smaller high-quality, amenity rich space in Birmingham could harm the city’s office market, says a regional specialist.

Charlotte Fullard, associate at property consultancy Vail Williams, based in Birmingham, believes it will take significant investment to meet current demand and cover the period before new builds are available.

And she says some buildings refurbished as little as five years ago were now not making the grade.

The Birmingham office market improved significantly in 2022, ending the year around 44% up on 2021, with the number of transactions in line with the five-year rolling average once more.

Post-pandemic pent up demand resulted in a flight to quality, as occupiers sought to attract and retain talented workforces back into Grade A office space.

A series of major mixed-use citywide developments drove the trend, offering high quality space and playing a significant role in attracting major occupiers, while also bringing some back into the city from out-of-town locations.

Fullard says with new pipeline office schemes due to come through in the coming years the future looks promising.

“However, despite the delivery to market of lots of new build Grade A office space, we are starting to see availability of smaller high-quality, amenity rich space dwindle.

“This is particularly true in the sub-5,000 sq ft range, where SMEs want a smaller office footprint than the large corporates, but the same level of quality.”

She said while Birmingham boasted a fantastic array of serviced offices providing high-quality, amenity-rich office space for smaller teams at locations, some occupiers still wanted to take a traditional office lease, with the flexibility and brand benefits that having their own space brings.

She added: “Many lack the time or capital to fit out their own space and therefore want a quick, fully fitted, flexible option with grow-on space which allows them to articulate their brand values though their office, rather than simply living the values of their serviced office provider.

“This is leading many landlords to invest in the delivery of category A plus (Cat A+) office space, and we are seeing many more fitted solutions come to market which are being leased quickly – over and above their unfitted counterparts.

“Landlords therefore need to invest significantly in the refurbishment of existing stock now, to meet current demand and secure quality tenants for the next three to eight years, whilst we await the delivery of new stock to market.

Such is the flight to quality that we are seeing some buildings not let because the quality is no longer deemed good enough by the post-pandemic occupier – despite having been refurbished in the last five years.”

Fullard said some astute landlords were already investing in their assets to address that situation, not only providing brand new M&E, concierge reception communal focus pods and meeting booths, but also incorporating fully fitted, Cat A+ floors.

She said that the city centre’s 120 Colmore Row was another great example of how an older asset had been refurbished to a high standard, providing fully fitted plug and play space which was now letting up and competing directly with serviced office providers.

“Some landlords may be cautious to invest significant capital expenditure in office refurbishment, thanks to the ongoing economic uncertainty, rising insolvencies, as well as materials and labour costs which have pushed investment yields out. But for those willing and able to look at the long game, now is the time to act.”