Birmingham office market research – quarter 1 2017
With Q1 2017 delivering a good quarter’s performance, in line with average annual take-up, it’s great to see the Birmingham office market getting back on track, following the transaction results for the second half of last year. What has helped the Birmingham office market figures most of all this quarter, is the healthy number of larger lettings that sit between the small lettings and the headline deals. We saw four transactions over 10,000 sq ft in Q1, equating to 13% of transactions.
Large lettings boost the Birmingham office market in Q1
In recent years, we have tended to see quite a difference between the two ends of the Birmingham office market in terms of transaction size, with little in the way of deals in the 10,000-20,000 sq ft category. However, Q1 has kicked off the year with four such transactions in the three-month period, as opposed to the usual one or two. This has helped boost the total for the quarter, in the absence of a circa 50,000 sq ft transaction.
|Office space (sq ft)
|Cornerblock (2 Cornwall Street)
|10 Temple Street
Whilst only two of these larger transactions house occupiers as such, the other two being serviced office operations, the level of viewings in the quarter from larger corporates means that we anticipate more good news in Q2.
Smaller end of the market buzzing with activity
The two large lettings to serviced office occupiers, which totalled 32,588 sq ft – 18,378 sq ft to iHub at Colmore Gate and 14,200 sq ft to Alpha Works at Alpha (formerly Alpha Tower) – cater for the smaller end of the Birmingham office market. So, whilst they represent significant lettings to serviced office operators, they also indicate the ongoing strong demand within Birmingham city centre for smaller office suites, offering flexibility and ease in flexing up or down the amount of office space required.
Q1’s transaction figures show us that the micro businesses within the Birmingham office market – up to 10 employees – are highly active. 14 transactions, 45%, in Q1 were under 2,000 sq ft – and just over half of these were below 1,000 sq ft.
Over the past few years we have seen a consistently high level of these smaller transactions for office space in Birmingham city centre, quarter by quarter. This affirms that small businesses are prospering – and when you consider that many of these smaller lettings have been companies in the recruitment and financial sectors, it tells a positive story of the city-wide economy.
Alpha starts living up to its name
With a unique view of the city, Alpha’s prominent city centre position has meant that, theoretically, it should have always been popular with occupiers. However, over the past 10 years or so, it has been felt by the Birmingham office market that it has simply not been achieving its potential. That all changed in Q1 2017, with its highest level of activity for over a decade.
Owners, Commercial Estates Group (CEG), have carried out a very well thought-through remodelling, repositioning and transformation of this iconic property, with its heritage dating back to the former ATV Centre – and the market’s response to these works has been immediate.
Alpha lettings during Q1 2017
|Office space (sq ft)
|Industrial & medical gases
|TSP (Thrift Savings Plan)
This raft of lettings over the course of a single quarter is impressive, even when you exclude the 14,200 sq ft let to Alpha Works – CEG’s serviced office operation at Alpha, and an important element of their repositioning programme.
While the Birmingham office market awaits new office space, on the site of various developments across the city, offices in locations that provide great access to public transport and the amenities of the city centre are proving very popular. Those property owners that have made smart refurbishments to their office space, and brought it to market, are seeing excellent returns.
With a high specification refurbishment, an excellent location – sitting between Paradise and Arena Central, floor plates of 7,100 sq ft and the addition of a much-needed coffee bar amenity on the ground floor, CEG has made Alpha the ‘go to’ office location for occupiers under 10,000 sq ft. The addition of its own serviced office operation – Alpha Works – further extends its occupier reach.
Previous owners had only refurbished the offices with a ‘vanilla’ treatment and had not established the right offering to differentiate the product. In contrast, CEG has created a younger and more vibrant feel, that appeals to the millennial occupier – producing the right quality of product at a good mid-teens price point, together with an amenity offering.
Of the occupiers that have taken space at Alpha, we can also see quite a diverse range of businesses taking space – this should bode well for the building ongoing, as the more diverse the portfolio of occupiers, the more sustainable the occupancy and income production.
10 Temple Street now coming on stream
Q1 also saw the first letting at 10 Temple Street – another long awaited £5m remodelling and refurbishment project within Birmingham city centre.
Specialist global recruiter, the SThree Group, which focuses on the STEM (science, technology, engineering and mathematics) sectors took the full 10,035 sq ft across the building’s 4th and 5th floors on a 10 year lease. SThree will consolidate a number of staff from existing offices in Birmingham and will operate its Progressive, Huxley Engineering, Computer Futures and Real Staffing recruitment brands from the building.
Cornerblock close to practical completion
With, building owner, Bruntwood’s Cornerblock £11.5m refurbishment now close to completion, it secured the largest letting of the quarter – 22,953 sq ft to Arcadis Consulting, relocating from Targetfollow’s Baskerville House serviced office operation to acquire more long term office space.
The former 2 Cornwall Street building, in the heart of Birmingham’s Colmore Business District, has undergone an extensive modernisation throughout, with new build extensions across the site filling in the gaps of the existing layout. This has seen the building rise up a further five floors in places, increasing square footage to a total of 110,000 sq ft. A new floor-to-ceiling envelope glazing offers panoramic views across Birmingham city centre. Other amenities include private basement car parking, a cycle hub, a double-height reception area and a rooftop terrace accessible to all tenants within the completed building.
Limited availability in Birmingham Jewellery Quarter
The figures this quarter show the sub 1,000 sq ft transactions, which normally gravitate towards Birmingham Jewellery Quarter, being retained more within the city centre itself. The two transactions within the Jewellery Quarter are at the Assay Studios, which has also performed well in previous quarters. As with 50-54 St Pauls Square, those buildings that are refurbished to a high quality and with an element of ‘quirky features’ that differentiate them within the marketplace, are quickly snapped up. As a result, Birmingham’s Jewellery Quarter now has limited availability of good quality office space.
With the good level of corporate enquiries and viewings in Q1, we are anticipating a respectable level of take-up in Q2, with some larger lettings set to complete. With the lead time to obtain board approval, particularly in the over 20,000 sq ft category, those that don’t complete in Q2 will carry over to Q3. With the requirements that we understand to be out there, or forthcoming, it could be a busy Q3, both in terms of transactions and new enquiries.
Following a disappointing second half of the year in 2016, we seem to be looking at a Birmingham office market that is back on form. We are also anticipating the announcement, in the coming months, of the chosen site to house the HMRC requirement, which will be in excess of 200,000 sq ft, giving a further sizeable ‘shot in the arm’ for the office market and city economy.
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, please contact Mark Robinson on 0121 212 5994 or email email@example.com.