Birmingham office market research – quarter 2 2018

In Q2 2018, the Birmingham office market achieved a total of 169,929 sq ft of transacted office space across 31 lettings – square footage and number of transactions both up on last quarter. From this, it’s evident that despite the uncertainty of Brexit, people are still taking space in the City – albeit on more flexible terms.

The second quarter of 2018 for the Birmingham office market was dominated by substantial serviced office lettings, continuing a trend to feed demand for office space flexibility, which has been evident over the past 18 months.

The two largest occupiers taking space were government departments – the Environment Agency and Highways England (formerly the Highways Agency).

Serviced offices continue to balloon, will they burst?

Over recent quarters, the Birmingham office market has seen a high level of transactions where space has gone to serviced office operators.

Q2 2018 saw 93,927 sq ft let to serviced office operators, over five transactions, equating to 55% of the square footage of office space taken in the quarter. With the exception of Apex House in Edgbaston, these are all based in Birmingham city centre. Last year, office space going to serviced offices accounted for 20% of the total space transacted in the year, which was up ten-fold on the 2% of the previous year.

Office buildingServiced/managed office operatorOffice space (sq ft)
Somerset HouseBE Offices38,162
2 Colmore SquareInstant Managed Offices21,232
Colmore GateiHub18,378
Apex HouseRegus11,560
GN HouseCitibase Group4,595

We would not necessarily expect the market share achieved in Q2 to be indicative of the year, with Q1 seeing a single deal to a serviced office operator – the letting of 11,343 sq ft at The Colmore Building to Orega.

With so much space going to serviced/managed offices – 313,079 sq ft in 18 months, 24% of total take-up – it raises the question: “Are we headed for the London model?”

WeWork is now Central London’s largest office occupier, with a stake of 2.6 million sq ft as of January 2018.

Started in 2010, WeWork has created a niche product, with trendy co-working space aimed at millennial tech start-ups — utilising a memberships model, rather than leases, and facilitating communal activities and offering perks such as free beer. The extent of WeWork’s success and the popularity of its business model has attracted the attention of larger companies, offering their staff flexible working conditions.

The serviced office trend that has developed in London dictates that the majority of requirements below 5,000 sq ft are going to serviced offices.

Somerset House, Birmingham

Largest letting of the quarter goes to serviced offices

The letting to BE Offices at Somerset House represented the largest single transaction of Birmingham office space in Q2 2018. The London-based serviced office provider took a 15-year lease on the whole office building, totalling 38,162 sq ft over six floors.

Prior to this, BE Offices did not have a presence in the City, which in effect makes this inward investment. However, the space is not now occupied – it is available, albeit on a non-traditional lease basis.

Another Instant Office

Instant Managed Offices was behind the third largest Birmingham office space transaction in Q2 2018; the managed offices provider took 21,232 sq ft at 2 Colmore Square.

Last year, Instant Managed Offices secured four fairly substantial office space transactions in Birmingham city centre – totalling almost 50,000 sq ft – on traditional leases, acting on behalf of a single occupier in each case, which then took a shorter license within the let space.

2 Colmore Square, Birmingham

It’s understood that for 2 Colmore Square, Instant Managed Offices has acted as an intermediary on behalf of Highways England, in a similar way to the previous lettings they took last year. Furthermore, it’s thought that this substantial letting could also be HS2-related – as were three of the transactions last year – allowing Highways England to take the space they need for the time they need it during the HS2 project.

Instant Managed Offices provides occupiers with a managed office solution, providing flexibility, as well as fixed, known budgeting – with utilities and other occupational costs included within a single price.

Examples of this include the following occupiers, where Instant Managed Offices leased office space on behalf of the HS2 contractor (in the first three cases):

  • Kier Property – 16,362 sq ft at 19 Cornwall Street
  • Laing O’Rourke – 12,612 sq ft at Cornerblock
  • Fusion – 12,414 sq ft at Cornerblock
  • Capita – 7,607 sq ft at Gateway House

Change of heart from landlords

The success enjoyed by companies such as WeWork in London, and the growth in popularity for serviced offices within the City, is causing some landlords to have a rethink.

In light of the demand for flexibility within the Birmingham office market, more and more landlords are willing to consider alternative leasing arrangements – such as serviced office licensing models – as long as they get the premium they want. Given that occupiers are still in search of high quality office space – and space that is not refurbished is now considered to be of little appeal – they will pay the premium that the landlord expects.

The Clean Air Zone

A phrase on the lips of many Birmingham city centre businesses, reliant on vehicles for commuting and operations, is the Clean Air Zone. Affecting a number of major cities across the country, the Clean Air Zone could come into effect in Birmingham as early as January 2020.

The Government project will charge vehicles for entering particular parts of Birmingham city centre, much like the London congestion charge, in an attempt to improve air quality. The project’s announcement follows an array of reports which found that Birmingham’s air quality was shortening the lives of hundreds of people within the City.

With the cost that the Clean Air Zone will place upon heavy goods vehicles – upwards of £100 per day – it’s a distinct possibility that industrial occupiers in the region, particularly in areas such as Digbeth and the Jewellery Quarter, will be reconsidering their occupancy within the city centre. A charge of £10 per day will apply to cars and this is already in the minds of occupiers considering office space in the city centre.

Whilst more environmentally friendly vehicles will be exempt from such charges, the cost of overhauling a vehicle fleet in order to circumvent the charges may not be financially viable in the short term.

Infrastructure, infrastructure, infrastructure

The West Midlands Combined Authority continues its plan to expand its Metro network – to triple its current size – with the construction of its next phase. This next phase will see the tram system extend up Broad Street and the Hagley Road, giving greater connectivity between Edgbaston and Birmingham city centre.

From September, the works will extend through Paradise – a development which grows closer and closer to completion – and the programme for the Metro network sees it triple in size by 2026.

City core takes the lion’s share once again

The majority of lettings in Q2 took place in the city centre, which has been the case for a number of quarters. Whilst Q2 yielded more lettings for areas such as Jewellery Quarter, Edgbaston and Digbeth, the fact remains that readily available office supply in these areas has run low, and that is the key reason for lack of deals in these areas.

That being said, the second largest Birmingham office letting of Q2 2018 took place in the Jewellery Quarter.

Environment Agency

The only transaction over 10,000 sq ft to a ‘true occupier’ in the Birmingham office market was that of the letting of 26,799 sq ft to the Environment Agency at Aqua in the Jewellery Quarter.

It’s understood that this new letting will house the consolidation of the EA’s operations in Solihull town centre, Olton and Lichfield.

Aqua, Jewellery Quarter, Birmingham

Where are the larger occupiers?

The Environment Agency and Highways England aside, the largest letting to a regular occupier in Birmingham city centre was the remaining 6,188 sq ft of space on the second floor at The Colmore Building, which was let to insurance company, Chubb. Chubb joins The Colmore Building’s raft of high profile occupiers, which include Vodafone, Allianz, Investec, Grant Thornton, Hogan Lovells, and most recently, Rathbones and Willis Towers Watson.

However, with the volume of larger lettings to true occupiers diminished and serviced office operator lettings not representing occupied space, where are the larger occupiers? Only four ‘true occupiers’ took space over 5,000 sq ft and it’s important when looking at these figures to take this into account. Ultimately, the amount of space taken off the market for an occupier this quarter is less than it appears.

It should be said, however, that seeing plenty of small deals taking place in a quarter is not a bad sign. On the contrary, a high volume of smaller deals – 3,000 sq ft and below – shows that businesses are doing well in the City, which is an indicator of a healthy city-wide economy.

Furthermore, these smaller lettings show that, although plenty of small serviced offices are available now, occupiers are still willing to undertake traditional leases on the right space. It also demonstrates that the serviced office model is not necessarily the right solution for everyone.

All aboard the crane train

According to the Deloitte Crane Survey, Birmingham has roughly double the amount of new office space, currently under construction, that it had in 2006, its previous peak period of construction – prior to the financial crash.

With the construction projects likely to be in the pipeline in 2019, we would probably surpass what is already the highest rate of office space construction that the city has ever seen. What this means is that the overall commercial property market is incredibly buoyant in the City, and that’s because of great levels of inward investment and the growth of indigenous businesses.


Whilst larger requirements within the Birmingham office market are still a couple of years off, we understand that there are a number of 5,000-10,000 sq ft requirements for businesses looking to come out of London. These represent an exciting prospect of inward investment, as companies move to Birmingham to reduce occupational costs and address staffing issues.

With such a strong level of take-up from the serviced office market, will the bubble burst?

As for Channel 4, Birmingham has now made it through the second stage of shortlisting, along with Greater Manchester and Leeds, to house the television company’s national headquarters. Andy Street, Mayor of the West Midlands Combined Authority, has been quietly confident of the region’s chances and with only two other cities now competing, he may be on the money.

In regard to the conversion of office space into residential, which we have documented in previous quarters, we believe much of this has now taken place. Few office buildings, suitable for this purpose, remain which have not already been snapped up.

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

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Contact Malcolm Jones

0121 233 2330