Birmingham office market research — Quarter 2 2023

The Birmingham office market’s top five deals this quarter were all over 10,000 sq ft and together they totalled 107,041 sq ft, with serviced offices and education sectors representing four of the five transactions. The majority of larger deals in the quarter signified expansions, demonstrating the confidence prominent occupiers have in Birmingham city centre.

Global commercial property agents, JLL – which took 13,815 sq ft at One Centenary Way – was the only relocation over 10,000 sq ft. One Centenary Way offers some of the best new offices in the Birmingham office market.  As such, the move from 45 Church Street represents an upgrade in quality of space as the agent pursues greater ESG credentials.

Flight to quality quietens

Whilst previous quarters have been dominated by deals for the very highest quality space, this quarter saw singular, relatively modest transactions at One Centenary Way, 103 Colmore Row and Two Chamberlain Square.

A flight to quality has been a major trend within the Birmingham office market, with ESG (Environmental, Social and Governance) becoming a key driver for occupiers in their decision-making, as they look to retain and attract the talent their business needs. Q2, however, seems to show this trend slowing.

The reasons behind this could be various, although it is worth highlighting that the strong activity in this area of the market has eroded a significant amount of the readily available new and refurbished space. Consequently, there could, once again be an uptick, as stock that meets the ESG aspirations of occupiers comes on stream.

There are a variety of projects at various stages of development including:

• Colmore Gate – 171,834 sq ft – currently being refurbished to offer high quality, sustainable low/zero carbon office space.
• Drum – 200,000 sq ft – the former site of John Lewis in Grand Central is being refurbished to offer high quality offices with unparalleled transport links.
• Ariel – 330,000 sq ft – proposed office development as part of Phase One of a redevelopment of the Smithfield site between New Street and Digbeth.
• Three Chamberlain Square – 189,000 sq ft – the next development on the Paradise masterplan has begun construction and is due to complete in 2025.

Looking into the size brackets

There was a dramatic increase in the number of deals compared with the previous quarter, doubling in fact – achieving 36 deals compared with last quarter’s 18. This increase was centred around lettings below 5,000 sq ft as the market for smaller occupiers perked up and took space. In fact, for deals 3,000 sq ft and below, Q2 represents one of the most active quarters on record for the Birmingham office market.

Perhaps the most notable of the lettings in this sub 5,000 sq ft bracket was Handelsbanken’s securing of a quarter of a floor at 103 Colmore Row, totalling 3,855 sq ft. This is the smallest transaction to take place at the property so far. However, the pedigree of the occupier is an excellent addition for 103 and the deal is rumoured to have achieved a record rent for Birmingham city centre.

At the same time, we also see areas of the Birmingham office market that are notably quiet, particularly the 5,000-10,000 sq ft size bracket, which has secured fewer lettings across Q2 and recent preceding quarters.

Full house as serviced offices top the market

This quarter saw the largest letting taken by serviced office operator, Re-Defined, which took 36,343 sq ft at Louisa Ryland House. The building was the scene of last quarter’s largest letting when educational organisation, QA Higher Education (QAHE) took the lion’s share of the building – 45,180 sq ft. The letting this quarter to Re-Defined represents all of the remaining space at the property.

Louisa Ryland House’s 80,000 sq ft of offices have been comprehensively refurbished to an incredibly high standard. This means Re-Defined’s serviced offices, available up to 8,000 sq ft or 80 desks, will provide businesses with excellent quality space.

Re-Defined wasn’t the only serviced office operator taking space this quarter. Cubo, which last year secured the entire 24,000 sq ft fourth floor of Two Chamberlain Square, took a further 12,459 sq ft at the building. This indicates Cubo’s serviced office offer at the building has been popular in the past 12 months and may even be full. It has also proved popular with other occupiers within the building who have used it to extend their space.

Education continues letting streak

In Q1, lettings to educational institutions accounted for nearly 50% of the quarter’s take-up – with the top two transactions going to the sector. In a similar fashion, Q2 saw education occupiers take the second and third largest lettings with the sector accounting for two other deals in the quarter.

Office building	Size (sq ft)	Occupier	Location
156 Great Charles Street	22,924	Arden University	Birmingham city centre
54 Hagley Road	21,500	UK Curriculum and Accreditation Body (UKCAB)	Edgbaston
Quayside Tower	6,784	Waltham International College (WIC Property)	Birmingham city centre
Assay Studios	1,721	Ormiston Academies Trust (OAT)	Birmingham Jewellery Quarter
Total	52,929	30% of take-up	4 transactions

Taking a closer look at these education sector lettings:

• In the second largest letting of the quarter, Arden University – the fastest growing university in the UK – fulfilled a need to expand, by securing 22,924 sq ft spread over three floors at Crossways on Great Charles Street. The online education provider’s expansion is the latest proof in the city of the online education boom, galvanised by the pandemic.
• In a very close third place, the government organisation, UK Curriculum and Accreditation Body (UKCAB) took 21,500 sq ft at 54 Hagley Road.
• Waltham International College took 6,784 sq ft at Quayside Tower to establish a location in collaboration with Leeds Trinity University.

Edgbaston returns to the headlines

After a pronounced silence from offices in the city’s fringe areas, Q2 saw seven lettings in Edgbaston. Leading the way on these transactions was 54 Hagley Road, which secured three transactions totalling 29,600 sq ft.

Office building	Size (sq ft)	Occupier	Business sector
54 Hagley Road	21,500	UK Curriculum and Accreditation Body (UKCAB)	Education
54 Hagley Road	6,270	Greater Birmingham Chambers of Commerce	Business support services
Lyndon House	2,768	Modality	Care
Lyndon House	2,146	Sabz Solicitors	Legal
54 Hagley Road	1,830	FCN Group	Recruitment
10-11 Greenfield Crescent	1,657	Veincentre	Healthcare
Lyndon House	1,488	Involve Recruitment	Recruitment
Total	37,659

In addition to securing the third largest letting of the quarter to UKCAB, 54 Hagley Road will also now become the new home of the Greater Birmingham Chambers of Commerce. At 6,270 sq ft, the size of the letting itself seems to indicate that the team will operate a flexible working model.

Though this may not be the largest deal, it is a very important one. The Chamber plays such a significant role within the region’s business community, it is a big vote of confidence in the building and this fringe area to house such a relocation. It will be fascinating to see whether this relocation will have any wider impact on Edgbaston in the medium and long-term.

Fringe areas of Birmingham city centre, such as Edgbaston, Digbeth and the Jewellery Quarter, have grown increasingly quiet over recent years for a variety of reasons. Firstly, activity from landlords and investors to bring new and refurbished office space to market has been focused, overwhelmingly, on the city’s core. At the same time, the aforementioned fringe locations have seen their office stock diminish, primarily due to the conversion of buildings to residential.

Whilst it is great to see Edgbaston feature strongly in the Q2 figures, lack of availability in the area means that such activity cannot continue. Prominent Edgbaston office buildings with available space are now few in number – 54 Hagley Road, Tricorn House and Lyndon House.

Assay Studios secures eight

Assay Studios delivered a strong performance in Q2, enjoying a flurry of activity that comprised 8 deals. Although the majority are under 1,000 sq ft, to see this many occupiers take space within the building is an impressive achievement providing that whilst supply is low, demand for high quality Jewellery Quarter office space remains high.

Occupier	Size (sq ft)	Business sector
Ormiston Academies Trust (OAT)	1,721	Education
Core Five	1,323	Construction consultancy
Sandy Brown	689	Acoustic engineering
Maber Architects	602	Architects
Trinity House Group	512	Recruitment
Bespoke Commercial Finance	374	Professional services
Girl Grind UK	339	Charity
CRST	228	Logistics
Total	5,788

In these lettings, Assay offered smaller occupiers an excellent opportunity to take space in a prominent and exciting office building situated between the calmness of the Jewellery Quarter and the busy city centre with its broad range of amenities.

Thirst for Cat A+

As serviced offices rise in popularity and drive up the expectations of occupiers, landlords have increasingly looked to offer greater flexibility and evolve the proposition of their traditionally leased office space. Consequently, more office space is being finished to a Cat A+ standard, with fit out, meeting rooms, desks and other furniture included.

By providing this enhanced office space offer, landlords are making it easier for occupiers to move in with speed and reduce their upfront costs. It also means that when the occupier comes to leave the property, there is potentially less hassle for them and furniture can stay in situ.

A floor of offices at 10 Temple Street has received this level of fit out – showcasing the opportunities landlords have to differentiate their investments from direct competition. Importantly, this is also an excellent demonstration of the traditional office space now available to serviced office occupiers. 10 Temple Street offers maturing smaller businesses a more suitable office solution.

Outlook for Birmingham office market

It’s been greatly encouraging to see the increased number of smaller deals taking place in the Birmingham office market this quarter. Activity at the lower end of the market tends to be a reliable indicator of business confidence and the prosperity of the city. From these transactions, we can see the Birmingham office market is holding up nicely and is progressing following the challenges of preceding quarters.

We haven’t ever seen as many education occupiers in Birmingham city centre as we do now. It appears landlords and agents have identified a gap in the market to assist the growth in demand for remote learning and we would expect this to continue into the coming quarters.

As for much-needed, high quality stock, major office refurbishment projects have been announced:

• 19 Cornwall Street, which offers 139,000 sq ft across seven floors, will be refurbished to become a smart-enabled, net zero carbon building.
• Arca, formerly St Phillips Point, which offers 65,000 sq ft, is undergoing a major £5.5m facelift. The building is owned by Oval Real Estate which has decided to transform the building into a ‘modern office development’ with a large roof terrace, cycle storage, shower and changing facilities, and secure lockers.

See full details of the transactions featured in our Birmingham office market research, comprising office space in Birmingham city centre and Edgbaston.

For more information on the Birmingham office market, please contact Malcolm Jones on 0121 233 2330 or email mjones@kwboffice.com.

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