Whilst this quarter delivered an underwhelming result, KWB is aware of several larger deals that will complete in the coming months, painting a more optimistic picture of a highly resilient office market.
Even with fewer transactions, the wide variety of occupiers taking space this quarter is testament to the broad appeal of Birmingham’s out-of-town office market.
Flexible office provider, Orega, took the largest amount of space in the Solihull office market this quarter, with a letting of over 30,000 sq ft at Ingenuity House. The company signed a Partnership Agreement with the building’s owners, Abrdn, to create a high spec flexible workspace of 550 workstations, over the ground and first floors of Ingenuity House, which will open in January 2024.
The new workspace is designed to be a modern, flexible base for the area’s professional and financial businesses, and will offer:
With this in mind, it’s not too surprising that Orega has also secured a major financial services business at the property, which will take 150 desks on the 1st floor on bespoke, flexible terms.
Ben Hutchen, Real Estate Director at Orega, commented: “Ingenuity House is a unique building that will attract a lot of interest from businesses who are increasingly looking for a flexible way to occupy property but also require high quality state-of-the-art space. The popularity of flex space has been growing in Birmingham.”
According to published market research, Birmingham now has 650,000 sq ft of flexible office space, an increase of 37% on 2022 with an average occupancy rate of 85%.
Ingenuity House was built by – and for – Interserve as a flagship example of what an office building could be, opening in 2018. It features an innovative, forward-thinking design built around sustainability and wellbeing, with an office specification well above that of any new buildings being constructed in the wider region.
The layout of the 113,654 sq ft building – and its impressive specification – had seemingly made it a prospect primarily for a single, major occupier with a significant budget. Following the agreement with Orega, the letting strategy will be to find occupiers for the remaining floors. KWB is aware of further interest at the property, regarded as one of the most sustainable in the country. With such a strong proposition for occupiers looking to enhance their ESG, it will be interesting to see who takes space at the property in the future.
| Office building | Size (sq ft) | Occupier | Sector |
|---|---|---|---|
| Ingenuity House | 30,633 | Orega | Serviced offices |
| Highlands House | 5,737 | Energym | Gym equipment |
| De Montfort House | 2,432 | Mercury xRM | Recruitment software |
| Coleshill House | 2,103 | JBA Consulting | Environmental consultants |
| 39 Dominion Court | 592 | ILP Partners | Commercial property agents |
| Total | 41,497 |
The largest letting of the quarter went to a serviced office provider – an occurrence we’ve seen often in Birmingham city centre but rarer in the out-of-town market. Serviced offices have proven popular in Solihull and the M42 corridor in recent quarters, helping address occupier demand for flexible space as some take a more cautious approach to their office space decisions.
We last saw major lettings to serviced office operators in Solihull in 2021, when two lettings, totalling over 40,000 sq ft, took place at properties previously occupied by MSO Workspace, which had then gone into administration. As such, these were not new serviced offices. Chadwick Business Centres and Citibase took on the responsibility for MSO’s existing operations, enabling existing flexible occupiers to continue their ongoing licences.
Q3 2023’s letting of over 30,000 sq ft of such high quality space at Ingenuity House demonstrates that flexibility is very relevant in the out-of-town market. This is underlined by Orega’s securing of 150 desks to a financial services occupier ahead of the flexible space opening next year.
Jane Erasmus, Sales & Marketing Director of leading serviced offices provider, UBCUK, said: “UBC has experienced strong demand for its flexible workspace at Birmingham Business Park in 2023. Occupancy currently sits at above 90% and enquiry levels on par with that of pre-pandemic. Flexible workspace, like other office markets in the region had been adversely affected by the pandemic, so it’s encouraging to see existing occupiers having the confidence to expand their workspace, despite the prevalent change to hybrid working.
“In the year so far, existing occupiers have expanded their current office space at UBC and, since Q2, we have welcomed seven new SME occupiers to our Birmingham Business Park serviced offices. These come from a mix of service sectors, including two businesses headquartered in other parts of the UK, with the move representing the opening of their first Midlands branch office.”
Whilst the Solihull market has delivered modest numbers this year, KWB is aware of several healthy-sized transactions due to complete in the coming months. This flurry of activity will total more than 50,000 sq ft across four deals that span key locations within the Solihull office market and sectors ranging from technology to financial services.
Availability has been a heavily restrictive factor for Solihull in recent quarters. Birmingham Business Park, for example, stands at around 3.3% vacancy rate. Whilst interest in the area’s leading business park continues to be strong and retention is high, there are few opportunities for new companies to take space.
When committing to a traditional lease, occupiers want to find space that’s best suited to their requirements in the long-term. This typically means they need choice – which had become a rare luxury in a market that has seen so much demand and take-up.
A mix of low availability and caution from occupiers in challenging economic circumstances has led to quieter quarters this year, but the best quarter of the year is still ahead. As previously mentioned, four significant transactions will deliver over 50,000 sq ft of take-up in the final quarter, which is greatly encouraging.
Demand is in the pipeline, too. During the recent Birmingham Tech Week, 16th – 20th October, it was announced that tech businesses were looking to grow their teams in Solihull. Consequently, these occupiers will likely need to take additional space in the area to facilitate their expansion.
Smaller stock continues to be hard to find in the Solihull office market and this 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.
See full details of the transactions featured in our M42 and Solihull office market research.
See also our Birmingham office market research.
