M42 and Solihull office market research — Q1 2020

The market for offices in Solihull and the M42 corridor achieved a modest total of 40,362 sq ft across 10 transactions. The Solihull office market continues to see strong demand with lack of supply, but coronavirus brought the first quarter to an early end.

The trademark resilience of the M42 and Solihull office market, which succeeded during both Brexit uncertainty and the last recession, will be put to the test at this very challenging time. Whilst the lockdown is likely to make a dent in the numbers, history suggests that the M42 corridor will fare better than Birmingham city centre during these difficult months.

Solihull office market at a glance

• MV Kelly secures large freehold purchase – property was on the market for a matter of days
• Lacklustre quarter is the result of two months of activity – lockdown pauses market
• Expansions dominate the quarter – several occupiers clearly prospering on the M42 corridor
• Town centre sees flurry of deals – occupiers find offices despite lack of supply
• Redditch returns and accounts for a third – strong show in the Redditch office market in Q1
• The Solihull office market during coronavirus – how will this resilient market fare?
• Outlook – HS2 construction sign-off indicates bright future

MV Kelly secures large freehold purchase

The largest transaction this quarter saw groundworks specialist, MV Kelly, take 11,219 sq ft at Cogen Court on Cranmore Boulevard in Solihull.

Apart from it being one of the largest freehold purchases in the area for some time, this transaction is also particularly impressive for the time the property was on the market. From an office market perspective, Cogen Court was available for a matter of moments, relatively speaking. The speed at which it was snapped up is testament to the strength of the market and the rarity of freehold office space in Solihull.

Cogen Court, Solihull

MV Kelly had been looking for offices to purchase for around 12 months. It is understood that the company will be relocating staff out of its current Tyseley head office.

It may have been the largest, but MV Kelly wasn’t the only freehold office purchaser in Q1 2020. IT consultants, CIS, also acquired 2,963 sq ft in Redditch at 9 & 10 The Oaks. You can read more about the Redditch office market later in this article.

We are sure that property that is made available to buy will appeal to a large cross-section of the business community – even at this time.

Lacklustre quarter is the result of two months of activity

In a typical quarter of the M42 and Solihull office market, we would tend to see between 12 and 15 transactions. Q1 2020 delivered just 10 deals, most of which were at the smaller end of the scale. As we have mentioned previously, this is largely because, with Q1, we are essentially looking at a two-month quarter, with the market on pause for most of March.

A lack of larger deals is primarily due to a chronic shortage of available stock. Indeed, we saw no office space transactions take place at the major business parks along the M42 corridor – namely Blythe Valley Business Park and Birmingham Business Park.

Demand for office space at locations such as Birmingham Business Park is still high, as offices here are much sought after.

However, with available stock on the Park at its lowest ever, occupiers simply don’t have the options they require to find the right space for them. And so, they wait.

Expansions dominate the quarter

The out-of-town office market is generally regarded as being somewhere that can provide substantial amounts of office space with room to expand. It’s not surprising then that a number of the transactions this quarter represent businesses taking additional space at their existing premises. These expansion deals include:

• L&G Home Finance took an additional 3,859 sq ft at Warwick House in Solihull town centre
• Purple Bricks took an additional 3,185 sq ft at Cranmore Place in the Cranmore area of Solihull
• Cadent Gas took an additional 2,323 sq ft at Radcliffe House in Solihull town centre

Whilst the overall number of deals in Q1 is low, to see a good number of expansions in the area this quarter indicates that businesses are continuing to prosper here.

Solihull town centre sees flurry of deals

Over recent quarters, we have highlighted the dwindling supply of town centre office space in Solihull. In Q1, lettings at Warwick House, Radcliffe House and 1 Homer Road see the supply decrease further. However, it is good to see these transactions taking place.

The 8,662 sq ft of offices in Solihull town centre secured during Q1 2020 represents 21% of the overall take-up within the M42 corridor.

Redditch returns and accounts for a third

3 Brooklands, Redditch

Transactions in Redditch accounted for 30% of deals and 35% of overall take-up – a total of 14,233 sq ft of the quarter’s 40,362 sq ft.

Over recent years, lettings in key office locations along the M42 corridor outside of Solihull, such as Bromsgrove and Redditch, have decreased due to lack of supply. Frequently, these locations have had little or no space, and when space has become vacant and refurbished, it has been taken up quickly.

Areas like Redditch offer many benefits, such as their proximity to the M42 and public transport infrastructure. Yet space here is significantly cheaper than Solihull or the major business parks – giving it additional appeal.

Redditch office space transactions in Q1 2020

The second largest transaction on the M42 corridor in Q1 was the letting of 7,825 sq ft at Hedera Road, Redditch to pharmaceutical company, Biocare. The business, which manufactures health supplements, has seen a dramatic rise in demand for its products during the pandemic. The response from customers has been so strong, in fact, that a number of Biocare’s products have sold out. By taking space at Hedera Road, Biocare was also able to take warehouse space effectively next door to its offices. Biocare will be relocating from offices at The Lakeside Centre in the south Birmingham area of Kings Norton.

Hedera Road, Redditch

The Solihull office market during coronavirus

With coronavirus putting the country into lockdown, many occupiers are no longer based within their offices and have either furloughed their staff and/or reduced operating hours. The property market, countrywide, has also been affected, with activity on pause.

Typically, the demand for out-of-town offices is both resilient and relatively consistent, even during challenging times. The Solihull office market fared well during Brexit uncertainty following the referendum and showed the same defiance through the last recession – during which it appeared almost untouched.

The reason why it tends to push through events that can be demanding to city centre markets is the sheer variety of occupiers that the out-of-town office market attracts. This diversity provides security for the market, whereas Birmingham city centre offices primarily host service-based businesses. So, given this resilience during hard times, will it soldier on through the coronavirus lockdown?

In our Birmingham city centre office market research, we have also discussed how occupiers and landlords must communicate and work together (“Coronavirus conversations need to happen“) to get through the lockdown period.

Outlook

CGI of HS2 Interchange Station, Solihull

In Q2, we would expect the Solihull office market to see a better rate of activity, relatively speaking, to that of Birmingham city centre. Nevertheless, as we have covered in our Birmingham city centre research, many deals that were or still are in solicitors’ hands will currently be static. Occupiers that want to take new office space are unlikely to commence their lease at a time when they are unable to move into the new space.

In addition to PM Boris Johnson approving the decision to press ahead with HS2 in February, construction was also given the green light to continue in April, during lockdown. This confidence from the Government should act as a positive indicator for business beyond the pandemic. It should also provide helpful stimulus for the market in the coming quarters and will, of course, create many jobs for the region.

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.

To register for future research updates, click here. See also our Birmingham office market research.