KWB’s latest transactions research for offices in Solihull and the M42 corridor shows that they took 55% of open market Solihull office space lettings, in a quarter that saw a record level of pre-lettings, across the Birmingham and Solihull office market.
The off-market pre-let to Interserve of 145,000 sq ft at International House in Solihull, to be redeveloped, shows availability of office space in Solihull and the M42 corridor is dwindling.
With 277,175 sq ft of office space in Solihull, this quarter has seen transacted 125% of the average annual take-up, in just 3 months. Even with the Interserve pre-letting taken out of the equation, the market would still have achieved over 6 months’ worth of lettings in a 3-month period. In this respect, KWB achieved 72,711 sq ft of the 132,175 sq ft open market lettings conducted in the Solihull office market in Q2, which equates to a majority share of 55%.
KWB was also responsible for 4* of the top 5 open market deals in the quarter:
|Office building||Location||Size (sq ft)||Occupier||Business sector|
|3500, 3700, 3800 Parkside*||Birmingham Business Park||24,843||Changan Automotive||Automotive|
|1310 Solihull Parkway*||Birmingham Business Park||16,700||UBCUK||Serviced office centres|
|2610 The Crescent*||Birmingham Business Park||16,668||Ryder Trucks||Automotive|
|3 The Green||Solihull||10,612||Solihull MBC||Government|
|Friars Gate*||Solihull||10,400||Bank of Ireland||Financial|
KWB’s Mark Robinson said: “It’s been an incredible 3 months for the Birmingham and Solihull office market. KWB is delighted with the results we’ve achieved in Q2, particularly in Solihull. Corporate consolidations and relocations have meant big lettings for Birmingham’s city centre and out-of-town offices.
“Birmingham Business Park in particular continues to welcome new, larger occupiers to the M42 corridor, but a requirement like Interserve’s having to be pre-let – at International House – is a sign that demand is beginning to outstrip readily available supply.
“The high level of take-up in pre-lets across Birmingham – over 400,000 sq ft – has shown us that activity within the market from the corporates is on the up. It won’t be long before one of the many proposed Birmingham city centre office developments is speculatively built.”
A remarkable 7 transactions for office space in Solihull over 10,000 sq ft: In recent years, there has been a notable lack of deals over 10,000 sq ft in the Solihull office market. 2013 yielded 4 deals in excess of 10,000 sq ft, and 2014 yielded 9. Including Interserve’s 145,000 sq ft pre-let, this year Q2 alone has seen 7 deals over 10,000 sq ft.
Over 400,000 sq ft of office space pre-let is ‘virtually unprecedented’, in the Birmingham and Solihull office market: Q2 2015 was the largest quarter for pre-lettings of office space in Birmingham and Solihull in over a decade, with HSBC’s 220,000 sq ft pre-let of Two Arena Central offices in Birmingham city centre, 44,000 sq ft pre-let to BCU at Eastside Locks and Interserve, one of the world’s foremost support services and construction companies, taking 145,000 sq ft at the redevelopment of International House’s offices near Birmingham Airport.
HSBC’s relocation to offices in Birmingham city centre from Canary Wharf is fantastic news for the city: but the pre-let highlights the lack of readily available office space in Birmingham city centre. With HS2 taking 200,000 sq ft at Two Snowhill last year, there were no properties left that could offer a corporate high-quality office space in Birmingham city centre of a similar volume. Last year, we reported the lowest level of Grade ‘A’, Birmingham city centre office space available for nearly a decade, with an estimated total of less than 500,000 sq ft. This lack of supply to demand put refurbishment and, more importantly, cranes firmly back on the agend
Over the past 18-24 months, the supply of offices in Solihull and the M42 corridor has been decimated: Birmingham Business Park has risen to be the prime location for lettings in Birmingham’s out-of-town office market over the past 2 years, as the sole option to quench the thirst of corporates for large pieces of high quality office space. KWB has played a substantial part in drawing occupiers to the area – with a majority share of transactions in most quarters – having achieved 55% of Q2’s open market deals for office space in Solihull and the M42 corridor.
As more companies have relocated or consolidated their operations to offices at Birmingham Business Park, Solihull and the surrounding area, the more interest and appeal that has been generated. With such high levels of take-up, a company of Interserve’s size has been left with few alternatives than to invest in a pre-let on office space in Solihull – to house the consolidation of 4 regional offices.
As speculatively built properties are thin on the ground, large corporates have only the option to pre-let a building. This requires a lot of additional planning and delay to a relocation, in order to allow for a property to be built. However, pre-lets of this size may well galvanise investors and property developers in speculatively building new properties – in light of probable demand, as well as economic stability and growth.
Junctions 4 and 6 of the M42 take the larger lettings that Solihull town can’t fulfil: In recent years, a lack in availability of large office space in Solihull town centre has directed companies to two key local areas, junctions 4 and 6 of the M42. Solihull town’s booming retail economy, which was unaffected by the recession, has led to the conversion of office space into retail outlets, in order to meet the demand for retail space. Most recently, the town centre office market lost 25,000 sq ft of office space at St Catherine’s Court, which will soon become a Waitrose outlet.
Redditch and Bromsgrove office drought brings lettings to a halt, yet demand continues: There were no lettings for office space in Redditch orBromsgrove during Q2. There are requirements from occupiers in the market but a chronic lack of high quality office space has given occupiers nowhere to go. The call for property owners/developers to act, by refurbishing vacant space and consider new build properties in these areas, only gets louder.
Consolidations show no sign of abating: The consolidation trend continues with several larger lettings to house multiple relocating offices. Interserve is the most notable of these but consolidations also include Ryder Trucks, relocating 5 offices from across the country into 16,668 sq ft at 2610 The Crescent, and Changan who is relocating its Nottingham and Warwickshire research operations into 24,843 sq ft of Parkside offices at Birmingham Business Park.
Solihull’s SMEs stick to the town centre, but new serviced offices on Birmingham Business Park may draw them out: Q2 saw several smaller lettings of office space in Solihull town centre, but with UBCUK acquiring nearly 17,000 sq ft at 1310 Solihull Parkway, a new serviced office centre at Birmingham Business Park will make smaller amounts of high quality office space available at the Park. It is expected that this will draw some of Solihull’s smaller occupiers from the town centre.
Research highlights for offices in Birmingham and Edgbaston
Fantastic Q2 figures, the biggest quarterly take-up in 8 years, show a city lining itself up for change. Most notably, HSBC’s pre-let of 220,000 sq ft of offices in Birmingham city centre’s Two Arena Central has completed – in a quarter that yielded many larger Birmingham office lettings. With HS2 plans continuing, Grand Central set to open at the end of Q3, the Paradise redevelopment well underway and a healthy supply of newly proposed Birmingham office developments – Birmingham is rejuvenating.
Highest level of quarterly take-up for offices in Birmingham city centre for 8 years: The past 3 months have brought an extraordinary level of take-up, with Birmingham city centre’s office market achieving 40 deals that totalled 521,000 sq ft – 80% of its average annual take-up – in just one quarter. Even without the largest deal of the quarter, the 220,000 sq ft pre-let of office space at Two Arena Central to HSBC, the market would still have transacted over 300,000 sq ft – nearly half the 675,000 sq ft annual average take-up.
HSBC pre-letting comes over the line, kick-starting Arena Central: HSBC’s relocation from London to Birmingham’s Two Arena Central offices in Birmingham city centre has completed with a pre-letting to the tune of 220,000 sq ft. To see the bank make a huge inward investment in Birmingham will have been encouraged by the reduced costs of occupation and staffing that Deustchebank has experienced since their relocation 2 years ago, to 5 Brindleyplace – which provided them with 134,000 sq ft of office space in Birmingham city centre.
Reinvigorated interest in offices in Edgbaston, and other fringe locations:Having received mixed levels of occupier interest throughout 2014, Q2 2015 has seen some great office space transactions in this fringe area of Birmingham city. Notably, 54 Hagley Road has several lettings, the largest of which was to Extra Energy, who took nearly 35,000 sq ft. These lettings acted as the catalyst for the sale of the building to Opus Land. There have been several other fringe locations that have received decent lettings, including 44,000 sq ft of space at Birmingham’s Eastside to BCU – where they appear to be centralising much of their campus.
Consolidations and new build propositions put Birmingham on an upward trajectory: Larger corporates continue to drive demand, with requirements to facilitate consolidation. With a strong, and growing, confidence that the market will continue to prosper, developers have numerous new development proposals for offices in Birmingham city centre, and these schemes include:
- 55 Colmore Row – IM Properties
- Natwest Tower/103 Colmore Row – joint venture between Sterling Property and Rocksprings
- Three Snowhill’s potential – if reports are correct – to be speculatively built
When a drought of immediately available, good quality office stock develops, occupiers may decide to re-gear in order to allow the consideration of newly proposed developments.
For more information, please contact Mark Robinson on 0121 212 5994 or email email@example.com.