The outlook for the Birmingham office market over the next two years is encouraging, with a high level of reported requirements, a good number of office enquiries across a number of sectors, and more than 1 million sq ft of new and refurbished office space coming to market, according to Birmingham commercial property agents, KWB.
“There is estimated to be up to 800,000 sq ft of quasi-governmental requirements at present, plus the needs of the Commonwealth Games, the continuing effect of HS2, and a large number of lease events taking place in 2019 and 2020, as occupiers that took five year leases in 2014 look to relocate,” says Malcolm Jones, KWB’s Head of Office Agency, writing in KWB’s 2018 Birmingham Office Market Annual Report.
Malcolm continued: “This means that 2019 already promises to be a better year than 2018, which saw the Birmingham office market finish strongly and generate a total office take-up of 753,316 sq ft, just ahead of the 10-year average.
“Fortunately, the City will have the new and refurbished office space to accommodate these requirements and more, helping to overcome the present shortage of grade ‘A’ office supply and increasing the range of choice available to all types of occupiers.”
In Birmingham city centre, just over 1 million (1.03m) sq ft of new or refurbished grade ‘A’ office space is either already available or due to come to market in 2019. This year, Three Snowhill and Two Chamberlain Square will introduce 554,626 sq ft of new-build office space, with a further 1.8 million sq ft in the pipeline to follow in 2020 and 2021.
In 2014, a peak 148 deals were completed. This means that 2019/2020 is expected to see a spike in the volume of lettings, as occupiers that took five-year leases in 2014 look to relocate in line with their growth plans for the next five-year cycle.
Malcolm continued: “We expect these lease events, coupled with the 1 million sq ft of new or refurbished space available in 2019, to trigger a flight to quality, as occupiers seek more modern, better quality office space, with lower running costs, to help attract and retain staff and clients. In some cases, they may actually take less space, but at a higher rental cost in a superior office building.
“As a result, commercial property landlords will have to work harder to retain and attract occupiers by offering more generous incentives. Better incentives are, however, unlikely to affect headline rents, and in line with the improving quality of available stock, we expect to see top headline rents increase to £35 per sq ft for new-build developments.”
Each quarter, KWB publishes research on the Birmingham office market, analysing office transactions and providing insights into the current and future office market. For the full list of office transactions in 2018, click here.