M42 and Solihull office market research — Q2 2019

A routinely quieter second quarter saw 12 occupiers taking 56,268 sq ft of office space. Impressively, Birmingham Business Park secured almost half of the office space transacted in the quarter whilst at its highest ever occupancy rate.

The sustainable, dependable Solihull office market delivered a second quarter that was consistent with that of 2018 and 2017, despite dwindling supply. The market has told a similar story, quarter on quarter, for some time but its trademark consistency is likely to be disrupted when occupiers are presented with no options for office space.

Solihull office market at a glance

• GKN takes over 10,000 sq ft for second time in 12 months – GKN moves out of Redditch
• Variety’s the spice of life – no two occupiers from the same sector this quarter
• BBP strong to the very last sq ft – strong take-up rates have taken up almost everything
• Quiet second quarter becomes an annual trend – ’17 and ’18 were smaller Q2s too
• No serviced offices in Q2 – MSO Workspace doing well but no operators took space
• Bromsgrove and Redditch reappear but not for long – as soon as it’s available it’s gone
• The drought as it stands – office supply has run dry, so what next?
• Solihull town centre quietens – no supply in the town centre getting in the way of business
• The sub-let solution – market gets resourceful and looks to occupiers to consider sub-letting
• Outlook – a call to commercial property developers to be bold

GKN takes over 10,000 sq ft for second time in 12 months

The largest letting of the quarter went to British automotive and aerospace component manufacturer, GKN. The business’s automotive arm, which has been headquartered in Redditch for many years, has now taken 13,172 sq ft at Birmingham Business Park’s 2100 The Crescent.

2100 The Crescent, Birmingham Business Park

GKN was bought, in a hostile takeover, last year by Melrose Industries. Since the purchase, Melrose has sought to divest some of the businesses GKN has stakes in, and instead move focus to its core operations and product lines.

As such, we also saw GKN appear in the transactions in Q3 of 2018, when the company took 11,450 sq ft at One Central Boulevard on Blythe Valley Business Park for its aerospace arm.

GKN decided upon the relocation to take advantage of Solihull and the Park’s transport links provided by Birmingham International Train Station, Birmingham Airport and the access the area has to the national motorway network.

The environment offered by Birmingham Business Park was also a deciding factor, and the community of businesses that exist on the park is one of its foremost selling points.

Variety’s the spice of life for the Solihull office market

The out-of-town office market in Birmingham is well-known for welcoming a wide range of occupiers – from IT to manufacturing to healthcare. It’s this broad appeal that makes the office market in this area robust and sustainable, and Q2 2019 was a prime example of the market’s audience. No two occupiers taking space this quarter were from the same sector and, whilst we always expect to see diversity from this area, it’s never quite looked like this.

Birmingham Business Park strong to the very last sq ft

The three lettings secured at Birmingham Business Park in Q2 2019 totalled 27,500 sq ft, which amounts to 49% of the quarter’s take-up. In numerous quarters over the past five years, the Park has been the dominant location for office space in Solihull and the M42 corridor, but with so little space now left available, it’s hard to imagine a situation in which that will continue.

In addition to GKN, Q2 2019 also saw the British Heart Foundation take 10,000 sq ft at Compton House on the Park. The charity relocated from offices in Lyndon House on the Coventry Road. The owner of the now vacant Lyndon House is understood to be converting the property to residential space. OSC Education has moved within the Park to 1760 Birmingham Business Park, taking 4,464 sq ft.

As has been reported in our quarterly research previously, the Park is at its lowest ever level of occupancy. In the pipeline for the Park, Blackrock is in the process of refurbishing 6210 Bishops Court, which will bring an 11,000 sq ft self-contained building to the market. We would expect that once available, 6210 won’t be around for long.

Birmingham Business Park entrance

Quiet second quarter becomes an annual trend

The second quarter has repeatedly been a quieter period in the Solihull office market in the past three years. This pattern arises due to deals near completion in December often being pushed into January the following year, and enquiries building up in April and being under negotiation through Q2 completing in Q3 and Q4.

No serviced offices in Q2

Solihull and the M42 corridor have not embraced the serviced offices trend in the same way seen in Birmingham city centre. This quarter saw no lettings to serviced office operators, whilst WeWork took 229,042 sq ft in Birmingham city centre and were the latest in a long list of serviced operators to do so in recent years.

Whilst managed offices can be quite popular in out-of-town areas, serviced office and co-working space is less common. This is in part due to the nature of co-working, it tends to lend itself better to a city centre location which benefits from excellent public transport links and may even be walking distance for those that live in the City.

That being said, it’s understood that MSO Workspace, which took 27,764 sq ft in the previous quarter at 2010 The Crescent on Birmingham Business Park has been doing well. The serviced office provider is enjoying a healthy level of take-up within the property.

Bromsgrove and Redditch reappear but not for long

Bromsgrove and Redditch’s appearance in the figures this quarter is a direct result of new stock becoming available and being snapped up within a matter of months. Thirst for space in these two key spots on the M42 corridor has gone largely unquenched in recent years, as there’s been a total lack of high quality office space available.

St Johns House in Bromsgrove saw a letting of 5,925 sq ft to tax consultants, Clay Knox. The space taken represents the letting of the entire first floor of the 12,000 sq ft building and has made the building, which is owned by Quartz investments, fully income-producing. Refurbishment of St John’s House was completed by KWB Workplace.

In Redditch, office space at Unit 10 Empire Court and 12 & 13 The Oaks was secured, totalling almost 7,000 sq ft. Unit 10 Empire Court saw lighting specialist, Lighting Consultants, expand within the same location, having already been based at the property, taking 3,869 sq ft. Meanwhile, 12 & 13 The Oaks, Clews Road was purchased by an inward investing private SIPP shortly after being introduced to the market.

Going forward, these areas are likely to see sporadic lettings in accordance with office space becoming available, rather than a resurgence of activity, unless there is a move by commercial property investors and landlords to bring refurbished or new office space to the market.

St Johns House, Bromsgrove

Solihull town centre quietens

Somewhere that would, however, benefit from a substantial serviced office offering is Solihull’s town centre. Now experiencing its own lack of office space, the town centre delivered just two office deals in Q2 2019 – jeweller, Fope, which took 1,948 sq ft at Radcliffe House and Phoebus Software, which took 1,601 sq ft at 43 Dominion Court.

Lack of office space in the town centre is due to both take-up and the conversion of numerous office buildings to residential space. The latter has involved Solihull office buildings being deemed more profitable as residential property, but which could have been refurbished to provide good quality offices. Though there are a few proposed projects for Solihull town centre that would deliver much-needed office space, there is not yet one which is guaranteed.

The Solihull office market drought as it stands

It’s not just Birmingham Business Park which lacks office stock – the entire Solihull office market is suffering from a drought. Following the last recession, locations such as Birmingham Business Park and Blythe Valley Business Park saw excellent rates of office take-up, but with that stock not being replaced, it now finds itself struggling to cater to demand.

For a time, the solution had been to refurbish existing space to bring it to a competitive specification and this was done by many landlords with great success, but this space has now been let.

On Blythe Valley Business Park this year, IM Properties announced the refurbishment of 01 Blythe Gate and submitted plans to speculatively build 15,500 sq ft of office space, which will be its second speculative development on the Park in 12 months.

However, more generally speaking, calls for commercial property developers and landlords to both speculatively develop and offer tangible and accessible design & build opportunities have yet to see the required level of action. As a result, the market has had to be more resourceful, as detailed in the next section.

Solihull office market sub-let solution

As the market looks for vacant space, one of the more ingenious solutions is to facilitate sub-letting within the market. Businesses occupying large amounts of office space are encouraged to consider how they use their space, and whether they need all that they occupy. Work culture has changed in many ways in recent years and so too has the configuration of workspace, making it more efficient.

Occupiers that have a large amount of office space in Birmingham’s out-of-town office market, but have yet to configure and optimise their offices, have a great opportunity. By restructuring their existing offices into a modern and efficient layout, they can free up an amount of space which could accommodate an additional occupier.

KWB is currently in such discussions and would encourage any occupiers either with empty space within their offices, or with the potential to occupy less space within their office, to get in touch. KWB can advise both on the restructuring of the office space, with our workspace and office move management consultancy specialists at KWB Workplace, and on marketing the space available for sub-letting.

The conditions of your lease may already permit sub-letting of space, but if it doesn’t, we can help. KWB can provide expert advice and negotiate with your landlord on your behalf to secure an adjustment to your agreement.

Outlook

It continues to be the case that the lack of stock is now restricting the Solihull office market, and it doesn’t just hold back the office market, it holds back the development of businesses within it and the businesses seeking to join it.

Director of Office Agency, Malcolm Jones, recently suggested that developers should see the state of the market as evidence to make a brave move, such as bringing forward an HQ-style building of c.80,000 sq ft on a speculative basis.

Malcolm said: “I think commercial property developers who believe in the long-term merits of the market for offices in Solihull and the M42 corridor could justifiably deliver a scheme of 80,000 sq ft on 20,000 sq ft floor-plates.

“They’d be rewarded promptly, as it would be snapped up as an HQ-style building, or they could bring forward smaller units, which would be equally as popular.”

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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