M42 and Solihull office market research — Q2 2023

Holman heads up Q2 

The largest letting was to fleet management specialist, Holman, which took 15,896 sq ft at 4020 Lakeside, situated on Birmingham Business Park. Traditionally a prime location for large lettings in Birmingham’s out-of-town office market, deals of this size are now increasingly rare – as stock on the Park has been hungrily snapped up over recent years bringing it to just 3% vacancy.

The transaction represents inward investment, with Holman being new to the area. Holman recently signed a seven-year deal with BT and the contract is understood to have been one of the largest of its kind in history, involving 37,000 commercial vehicles. BT has an extensive history at the Park and these new offices will undoubtedly play a vital role in helping to deliver on the telecoms giant’s requirements.

Inward investment

It wasn’t just Holman moving into the area. There were several inward investment deals this quarter, signifying the continued commercial confidence in, and appeal of, Solihull and the M42 corridor.

In the second largest letting of the quarter, Avant Homes took 6,938 sq ft at Wingfield Court in Coleshill. Whilst not true inward investment, the housebuilder is fairly new to this area, having previously been in Regus serviced offices. It’s excellent to see Avant now relocate into traditional space as it further establishes itself here.

New to Bromsgrove, server specialist, Montvieux took the fourth largest letting in Q2, securing 4,500 sq ft at 5 The Courtyard.

Junction 6 sees six 

This quarter saw the office transactions take place in a select few locations – Junction 6 of the M42, Redditch and Bromsgrove, and a single letting in Solihull town centre.

Junction 6 secured six of the deals, with four taking place at Birmingham Business Park. In total, the deals at Junction 6 represented 70% of take-up – 28,442 sq ft.

Office building	Size (sq ft)	Occupier	Location
4020 Lakeside	15,896	Holman	Birmingham Business Park
Wingfield Court	6,938	Avant Homes	Coleshill
6170 Knights Court	1,874	Mix Telematics	Birmingham Business Park
2625 Kings Court	1,578	Combat Stress	Birmingham Business Park
6110 Knights Court	1,328	Goodrich Consulting	Birmingham Business Park
De Montfort House	828	Holborn	Coleshill
Total	28,442

Aside from the deals at Birmingham Business Park, there were two J6 lettings at Coleshill. This has been an increasingly popular part of Birmingham’s out-of-town office market over recent years. Coleshill provides a more cost-effective alternative to other key locations where the combination of high demand and low supply have pushed up rents.

Junction 4 of the M42, home to the likes of Blythe Valley Business Park, has seen many large lettings over recent years but was silent this quarter.

Bromsgrove and Redditch, which have often been quietened by lack of available high quality office stock, have secured deals for a consecutive quarter – three of the top five to be exact.

Office building	Size (sq ft)	Occupier	Location
2 Ravens Court	4,757	Fizz Group	Redditch
5 The Courtyard	4,500	Montvieux	Bromsgrove
The Croft	1,876	FJ	Bromsgrove
Total	11,133

Relocation, downsizing and opportunity

Following the pandemic, many occupiers have been reviewing their office arrangements to match an evolution of their working practices. Some of those who had worked from home during the pandemic now take a hybrid approach and this has altered the amount of space they need.

We’re seeing a number of occupiers with larger space look to downsize. Whilst expansions are good news, downsizing is by no means a negative sign – when you consider other factors. Occupiers adopting a hybrid approach and reducing their office stake are often also upgrading their space. This demonstrates continued confidence in the area. Additionally, in a market where availability has been low and movement has been restricted, relocation and downsizing create new opportunities for landlords to refurbish office space and deliver new options for other occupiers to move.

More lease events ahead

Most businesses would only be able to change their occupancy upon a lease event. Those with a lease break after 2020, who have wanted to upgrade and/or reduce their office accommodation, have now dealt with their space. But that doesn’t account for everyone.

If you took a 5-year lease in 2019, or indeed a 10-year lease in 2014, next year may be your first chance to realise your new office requirements – and these conversations need to be happening now.  Both 2019 and 2014 were excellent years for activity, and so we would expect to see a significant amount of activity in the coming year from occupiers exercising their lease breaks, and they’ll have plenty of options too.

Lots of larger space coming back, but smaller space is lacking

New stock of refurbished Grade A offices in Solihull and the M42

Building	Location	Size (sq ft)
AIR	Solihull	70,000
Portland House	NEC / Birmingham Airport	61,000
One Central Boulevard	Blythe Valley Park	60,000
Blake House	Eagle Court Business Park	37,000
Total		228,000

It’s excellent to see nearly 230,000 sq ft of refurbished space come to market, across four properties, and there’s more to come. We expect to see a strong response to these refurbished buildings and those in the pipeline, as larger occupiers have some choice again when looking to relocate and enhance their ESG credentials. However, this is only true of those seeking larger space. Sub 3,500 sq ft, it’s a different story.

Most of the office deals that have taken place over the past few years have been below 5,000 sq ft. These transactions have taken place right across Birmingham’s out-of-town office market and the stock in all places has shrunk further and further. With so few options now available, it’s possible that demand in the serviced office market will increase if occupiers cannot find the traditional space they require.

Outlook

Severe lack of smaller stock in the Solihull office market is an important opportunity for landlords with vacant office buildings. Properties that can be refurbished to offer high quality office suites sub 3,500 sq ft will address the shortage, and can expect to see strong interest.

At the same time, demand for office refurbishment services has pushed up associated costs, with these increased expenses being passed onto the occupier, through higher rents.

See full details of the transactions featured in our M42 and Solihull office market research.

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

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