Office space Birmingham city centre – quarter 1 2016 research

2016 saw a record breaking Q1 for office sales and lettings in Birmingham city centre – with 36 transactions yielding a total of 283,697 sq ft.

2016 has seen the momentum of a ‘momentous’ 2015 carried straight through into the new year, with several larger transactions reaching completion, securing office space for high profile occupiers that have long awaited suitable property – the largest of these being the pre-let of 90,000 sq ft at Paradise’s 1 Chamberlain Square to PWC.

A healthy market, top to bottom

Q1 2016’s, unprecedented, 283,697 sq ft of transactions exceeded the previous Birmingham office market record for an opening quarter by more than 100,000 sq ft – that was back in 2010. The breadth of activity in the quarter was topped with 5 transactions over 15,000 sq ft, despite shrinking levels of readily available, high quality office stock. These top 5 alone account for 215,644 sq ft or 76% of the Q1 total, increasing the average letting size to 7,880 sq ft – up from 7,082 sq ft in Q4 2015. Combined with the number of smaller, ‘bread and butter’, transactions, the Birmingham office market had an excellent start to the year.

Office building Location Size
(sq ft)
Occupier
1 Chamberlain Square Birmingham city centre 90,000 PWC
55 Colmore Row Birmingham city centre 40,538 Pinsent Masons
Tricorn House Edgbaston 40,045 DAC Beachcroft
Centre City Birmingham city centre 25,600 Ingeus
Louisa House Birmingham city centre 19,461 Acivico Building Consultancy

Premiere pre-let for Paradise will house PWC

Professional services company and blue-chip occupier, PWC, has taken 90,000 sq ft of office space at 1 Chamberlain Square on Birmingham’s forthcoming mixed-development – Paradise, which will, in effect, link Brindleyplace to Birmingham city core. The pre-let to PWC satisfied an enquiry that has been in the market for some time. Until now, PWC had been taking short term lease extensions on their current offices at Cornwall Court, until a better, and realistic, alternative presented itself.

As demolition work of the old Paradise development has been in progress for several months now, the offices, due to be built there, have become a far more tangible proposition. Over the past few years, choosing to take a pre-let on this space simply wasn’t a viable option – contracts were yet to be signed, there was uncertainty over Birmingham Conservatoire’s location, and demolition work had not begun. Now, with PWC kicking things off, we anticipate further Paradise pre-lets in the coming months – sure to be welcomed by commercial property developers, Argent.

Large occupiers calling the shots to get upcoming new supply

It’s interesting to see prominent occupiers, such as PWC, ‘stay put’ at their lease-end – by way of short term lease extensions. The market would usually dictate that an occupier would need to relocate, if they did not want to renew their existing lease. The buying power that corporate occupiers have is allowing them to stick it out, following the end of their original lease, until the right piece of new office space becomes available.

In these situations, landlords agree to the extensions because they want to retain a larger occupier for as long as possible. The reasons that an extension would be rejected would be if the landlord has another occupier lined up, or they are looking to reposition, refurbish/restructure the building. With large, new build office projects and refurbished office space coming to the market, it is quite possible that we will see more of these larger occupiers, who have been extending their leases incrementally, now making the move to pastures new.

Similar to PWC, Pinsent Masons has taken 40,538 sq ft of Birmingham office space at 55 Colmore Row. Now that the extensive refurbishment is well under way, they have seen the opportunity to take a pre-let on space at the building – with its enticing floor plates. This will see them relocate from their current offices at Wesleyan Building, which has been their intention for a few years.

Largest deal of the quarter typifies the demand for professional services

The PWC and Pinsent Masons pre-lets, as well as DAC Beachcroft taking 40,045 sq ft at Tricorn House, affirms what we have seen in recent quarters – great strength in the professional services sector. Professional service industries, in fact, account for 45% of the office space transactions in number, 17/36, amounting to 212,810 sq ft – 75% of the total sq ft transacted in Q1.

The professional services industries tend to require staff of a high skill set, within their relevant, niche, field. As such, a strong level of transactions for professional services companies should signify good news for the strength and growth of the city’s talent pool.

Other notable lettings in this sector include Acivico Building Consultancy, who took 19,461 sq ft of Birmingham office space at Louisa House at Quay Place, along with smaller deals such as Kind Consultancy Ltd, who took 3,716 sq ft at Wellington House, Ecorys, who took 3,711 sq ft at Vincent House and Currium Solutions, who took 3,200 sq ft at Innovation Court.

Edgbaston offices get a shot in the arm

Across 8 of the city’s 36 deals, Edgbaston secured 59,261 sq ft – 21% of the city’s Q1 2016 total square footage, a share that is considerably higher than last year’s total of 14%.

This share was dominated by the letting of 40,045 sq ft at Tricorn House to significant property professional DAC Beachcroft, whose relocation from Brindleyplace gives Edgbaston a huge shot in the arm and its largest transaction for many a year. This letting, together with Extra Energy’s 34,000 sq ft at 54 Hagley Road six months ago, has taken the lion’s share of good quality office space in Edgbaston. With its competitive differential established, Edgbaston is now sustainable, particularly as demand outstrips readily available supply for office space in Birmingham city centre.

Currently, and historically, Edgbaston offers lower levels of rent than Birmingham city core, whilst still providing great access to amenities and communication links. If popularity continues to grow for offices in Edgbaston, we could see a slowing of the trend we have seen for Edgbaston office space being converted to residential, and this could even result in a rise in future headline office rents for the area.

As for other Birmingham fringe locations, the Jewellery Quarter saw three lettings, totalling 2,432 sq ft which represented just under 1% of the city’s total sq ft this quarter, and Birmingham eastside proved very quiet, with a single letting to National Express of 610 sq ft at Scott House, Digbeth.

The development of Edgbaston

Investment in the Edgabaston area, both recent and forthcoming, continues to enhance the overall appeal of the area – for residential and office occupiers alike.

The local amenities have been bolstered just last month with the opening of the first Park Regis Hotel in Europe, a redevelopment of the old Auchinleck House, overlooking Five Ways. The international hotel, which represents a £50 million investment, has 253 rooms including a giant ‘presidential’ suite as well as two restaurants, a gin bar, a saki bar, spa, gym and executive meeting rooms. The hotel’s Japanese pan Asian restaurant Rofuto, which offers views rivalling The Cube’s Marco Pierre White restaurant, is Birmingham’s second rooftop restaurant and bar.

Tim Abbots, Director of Estates for Calthorpe Estates, said:

“With the current developments taking place in Edgbaston Village adding amenity to the area, and the planned links to the city transport network by Centro and Metro, Edgbaston is seeing a resurgence in popularity as an office location in a less densely developed, green environment.

“Within the immediate vicinity of Edgbaston Village there is a strong commercial quarter, which includes over 3m sq ft of commercial office space. It is also home to Edgbaston Medical Quarter, with many world-class technology companies and leading medical practitioners.”

Recruitment and training transactions continue

The continued appearance of a number of recruitment and training companies in the quarterly transaction figures gives ongoing assurance of healthy levels of employment, and employment growth within Birmingham. In Q1 2016:

  • Kind consultancy: 3,716 sq ft at Wellington House in Waterloo Street
  • Cento Micro Systems: 3,625 sq ft at Hagley Court, Edgbaston
  • Lifetime Training: 2,172 sq ft at 63 Church Street, Birmingham city centre
  • Edustaff: 1,402 sq ft at Cavendish House, Birmingham city centre
  • Highfield College: 1,310 sq ft at 12-14 Legge Lane in the Jewellery Quarter
  • Woodrow Mercer: 200 sq ft at Colmore Place, Birmingham city centre

Q2 sees Birmingham hitting the ground running

It seems that the Birmingham office market in 2016 won’t be left in the shadow of the record year that preceded it. Q2 has opened with the announcement of an 85,000 sq ft office space letting to Network Rail at Baskerville House, a flying, and encouraging, start for the market following such a strong Q1. The transport sector, and related industries, are enjoying an affluent time in Birmingham; improvements to the city’s transport infrastructure – recent, current and future – include the revamped New Street Station, the extending Metro tram system and the proposed HS2 high speed rail line.

Many of the larger office space transactions – as we have come to expect – had been in the pipeline for some time. The bigger corporates will continue to set up new office locations or rationalise existing holdings where office space availability exists – and there are still some significant transactions in their early stages of negotiation. As we look forward, the recent drop in new enquiry levels in the small to medium-size market may lead to more modest, quarterly totals. The slower rate of new enquiries is, in part, due to the upcoming EU referendum and the economic uncertainty that surrounds it. This current apprehension to enter the office market is true of the rest of the country as well, including the South East. As such, following the referendum outcome, new enquiries could well, swiftly, pick back up again.

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

Download KWB Office Market Review 2015.

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