Birmingham office market research – quarter 3 2016
Our Birmingham office market research shows that Q3 2016’s lacklustre total transactions of 95,546 sq ft is not all quite as it seems. The year-to-date of 595,338 sq ft over 110 transactions is also almost up to the annual long-term average after just three quarters.
Brexit has removed some energy from the market but the fundamental ‘bread and butter’ transactions for offices in Birmingham city centre remain. Q3 lacks the one or two larger lettings which boost the quarterly figure – however, large lettings are underway and due to complete in the new year.
Highlights of Birmingham office market research
- Plenty of activity, but no larger transactions
- HS2 Royal Assent could trigger large lettings in 2017
- Refurbished offices welcoming a multitude of occupiers
- Good city fringe office space drying up
- Small-to-medium occupiers may turn to serviced offices
An active quarter lacking larger deals
When comparing the Birmingham office market research of Q3 and Q2, it is apparent that without the two largest lettings of Q2 – Network Rail and Syed & Co, which amount to 109,508 sq ft – this quarter is very similar to the one before it. 35 transactions for the quarter puts it in a similar ballpark to previous quarters in 2016.
We anticipate a bounce back for the market in the final quarter of 2016 – with some healthier transaction sizes delivering a more respectable total square footage. That being said, if the market only achieves a further 100,000 sq ft – which we would regard as disappointing – the Birmingham office market would still achieve its annual long term average level of take-up.
No game changer in 2016, but HMRC is set to provide one in 2017
2016 has seen a couple of particularly large transactions this year, such Network Rail’s 83,406 sq ft at Baskerville House and the pre-let of 90,000 sq ft at Paradise to PWC, although these are not necessarily at the landmark level of HSBC in 2015 nor HS2 in 2014.
HMRC is currently in the process of consolidating offices nationwide. Instead of having several small-to-medium sized offices throughout a region, HMRC is moving to a system of regional hubs. Currently considering several office buildings in Birmingham city centre of circa 250,000 sq ft, it is anticipated that HMRC will secure a new location in 2017.
Letting to Bouygues is largest of the quarter
Construction giant, Bouygues, took 17,221 sq ft at Albert House, Quay Place in the largest transaction for Birmingham city centre in Q3 2016. The relocation to the canal-side building, adjacent to the Birmingham Barclaycard Arena, will house the consolidation of Bouygues’ two office locations in the region.
2017 could be a landmark year
Birmingham’s office market could well see a landmark year in 2017, stock permitting. Many of the companies pitching for HS2 contracts are taking initial considerations of the available commercial property in and around Birmingham city centre – in order to be close to the HS2 headquarters in Two Snowhill.
We have already seen some transactions that would appear to be in response to HS2’s presence at Two Snowhill; for example, Jacobs Engineering Group, who have been closely linked with the HS2 project, took a lease of 20,000 sq ft at nearby 2 Colmore Square in quarter 2 of 2015.
The Royal Assent required to permit the rail scheme is expected to be given by the end of this year, and it is anticipated that this will start a chain reaction. Once Royal Assent is given, HS2 will begin awarding the contracts for the construction and supporting infrastructure of the project, which will then lead to crucial property decisions being made – as to where contractors will base themselves.
Market for refurbished office space continues to thrive
Q3 saw very few lettings of prime office space – instead, occupiers have been taking space that offers good quality refurbished space in ideal locations – as that is primarily what the market currently has to offer. These properties can demand rents in the high teens and low twenties depending on the exact location, the quality of refurbishment and floor plate sizes and layouts. Good examples of this would be Imperial & Whitehall – forming part of The Grand on Colmore Row – and Assay Studios and 30 St Paul’s Square, both located in Birmingham’s Jewellery Quarter.
Assay Studios has secured a raft of new occupiers over the last few months:
|Office floor||Occupier||Office space (sq ft)|
|First floor||Green Room||5,961|
|Ground floor||We Are Aspire||3,428|
Many of the companies taking offices in Birmingham city centre sub 2,000 sq ft – such as ELS Solutions and Robert Powell – are moving into Birmingham city centre in order to offer better connectivity for staff – being closer to city train stations, and other transport links and amenities.
City fringe office space starts to dry up
Edgbaston secured a few lettings in Q3, but when compared with its excellent achievements in Q1 of this year, it’s evident that supply in this area of the city’s fringe office market is dwindling. Calthorpe Estates has taken a good step forward in regards to the future of the area with the development of amenities in Highfield Road, such as the newly refurbished Michelin-starred Simpsons restaurant, The High Field gastro pub, The Edgbaston boutique hotel and cocktail lounge, and COMiDA tapas restaurant (opening just this month), which will support any potential commercial property projects.
Although some larger transactions have been halted or delayed by Brexit, we would expect the small-to-medium sized businesses – who usually deliver those bread-and-butter transactions – to have been impacted the most, with larger companies’ plans for relocation being driven more by lease events, consolidations and the drive for efficiency. For now, we are still seeing the small-to-medium sized businesses taking traditional leases on – or even purchasing – these smaller pieces of office space. However, we anticipate that these companies may now look to serviced offices for flexible accommodation that can be adjusted, should their requirements change during this uncertain period.
We also expect to see more ‘North Shoring’ as companies look to move high cost staff out of London to Birmingham, the latter now regarded as the most attractive location to benefit from this phenomenon.
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 firstname.lastname@example.org.