Positive outlook for 2013 office space Birmingham and Solihull / M42

Whilst Birmingham office space lettings saw take-up for the year fall by 33% from the long term average, transactions for office space in Solihull and M42 corridor experienced an increase of 37% over the long term average.

Office space: Birmingham city centre

After a slow start to 2012, with an uncharacteristically low level of take-up for office space in Birmingham city centre, the market made a good recovery in the second half with a number of large Birmingham office space lettings, putting the last two quarters on a par with the long term average.

The most notable office space transactions included:

• 40,036 sq ft at 2 Colmore Square/Cannon House to Shoosmiths
• 29,844 sq ft at Centre City to HM Courts & Tribunals Service
• 27,913 sq ft at 3 Brindleyplace to i2, who took over a former Regus serviced office centre
• 21,000 sq ft at 2 Colmore Square to BPP Training & Consultancy
• 18,999 sq ft at 35 Newhall Street to Mott MacDonald – see ‘KWB secures largest letting of office space in Birmingham city centre’

It is heartening to see a number of occupiers continuing to expand by taking significant amounts of additional office space, such as BPP Training & Consultancy at 2 Colmore Square (above) and Deutsche Bank with c. 15,000 sq ft at Baskerville House.

See full details of the transactions for office space in Birmingham city centre and Edgbaston.

2013 predictions for office space Birmingham

• With the number of significant sizeable lease events due over the next two years, we anticipate take-up for office space in Birmingham city centre to exceed that of 2012 with a potential to exceed the long term average.
• The bigger requirements are very likely to focus on prime stock and our research highlights a potential shortfall in prime office space in less than 18 months’ time.
• The secondary market for refurbished Grade A office space remains competitive and landlords should think more laterally about the way in which a letting can be structured. For example, offering a capital contribution towards a tenant’s fit-out instead of rent-free, as this would be more beneficial to an occupier’s balance sheet.
• The significant number of transactions at Birmingham Science Park in Aston, whilst small in size, demonstrates the success of the incubator facility and, potentially, signifies a source of future larger office space requirements:

• Office space in Birmingham Jewellery Quarter is still attractive to a number of organisations that do not necessarily need to be in the prime Birmingham city centre core.
• The one area that continues to struggle and suffer from net migration from it isEdgbaston, which retains office occupiers that are purely cost-driven. Edgbaston secured only 9 of the 133 lettings which represents 6.7% of the total number of transactions for 2012 in Birmingham city centre.

Office space: Solihull and M42 corridor

Transactions for office space in Solihull and the M42 corridor, which includes junctions 1-6 and the towns of Redditch and Bromsgrove, were 37% up on the long term average for this area, and 58% up on 2011, a level unseen since 2007 at the top of the market. These statistics even exclude the land sale on Birmingham Business Park to Rolls Royce, which provides a further 125,000 sq ft of office space.

In terms of the number of individual transactions for office space in Solihull and M42 corridor, there were 54 in 2012, 7 more than the previous year. KWB was involved with 20 of these transactions, 37% by number or 47% by square footage, a total of 153,339 sq ft.

Highlights of the year include:

• Apart from two tenant-led disposals from Centrica and Vodafone to market their surplus Solihull office space, Blythe Valley Park is now 100% tenanted after several years of having available office space in Solihull.
• The office market seems to have experienced an increased level of inward investment from occupiers who have relocated their offices into Solihull and the M42 from other areas, most notably: Waterloo Housing from Tamworth, Computacenter from Aston, iTradeNetwork consolidating their High Wycombe and Burton-on-Trent offices and Virgin Media consolidating all their Midlands satellite offices into one central hub at Eagle Court offices in Solihull.
• The average letting size increased by 47% to 6,031 sq ft, reflecting the fact that larger businesses are looking to consolidate their operations into more efficient M42 and Solihull office space. This was most evident with the Virgin Media transaction, which was the largest letting of office space in Solihull and the M42 area for 5 years. For further information, see our news article ‘Virgin Media acquires Eagle 3 offices in Solihull’.
• This was also the first 10-year lease to be taken in the market for 5 years, and was then replicated in the ArcelorMittal office space letting at FORE – see‘KWB lets 8,900 sq ft of FORE offices in Solihull to ArcelorMittal’.
• There was no one particular sector dominating the office space transactions, demonstrating the strength of the region as a whole.

See full details of the transactions for office space in Solihull and M42 corridor.

2013 predictions for office space Solihull and M42 corridor

• From the office occupiers that we are currently talking to, we see a number of customers looking to move into the Solihull and M42 market.
• The industrial sector locally has experienced good demand from the Jaguar Land Rover supply chain, however, offices in Solihull and the M42 are yet to experience a significant level of office space take-up from the vibrant automotive sector. We anticipate that this will change in 2013.
• We expect there to be additional demand from aviation-related companies following the Plot 500 land sale at Birmingham Business Park to Rolls Royce and completion of the new facility in 2014.

Mark Robinson, KWB, commented: “Whilst it’s still early in 2013, we have already experienced a healthy level of new interest for office space in Solihull and the M42 corridor and have also completed our first acquisition of the year, acting on behalf of Morson Projects acquiring 3,600 sq ft at Park Square on Birmingham Business Park. We have also acted jointly to secure the largest office space letting on Birmingham Business Park for 2 years following the disposal of 11,500 sq ft to British Car Auctions.”

For more information, please contact Mark Robinson on 0121 212 5994 or emailmrobinson@kwboffice.com.