Office space Solihull and the M42 corridor – quarter 1 2016 research

Lack of supply, an eager 2015 market and the economic uncertainty of Brexit produced a very modest quarter for offices in Solihull and the M42 corridor. However, the dip in new enquiries and larger office lettings will give way after 23rd June – and developers may respond by introducing new space to the market.

For the third year running, Q1’s a quiet one

2015 showed a great correlation of proportionate activity between Birmingham’s city centre and the out-of-town office market. However, the level of office market activity for Birmingham city centre in Q1 2016 is not reflected by areas such as Solihull and the M42 corridor.

The 14 Q1 transactions for office space in Solihull totalled 45,562 sq ft, with an average transaction size of 3,040 sq ft. Although 2016 achieved far higher than Q1 2015’s 25,897 sq ft, the first quarters of 2016, 2015 and 2014, have all proven to be slow, and topped by a letting of less than 10,000 sq ft. This looks as if it could become a fairly standard pattern for the out-of-town office market – and certainly not something to raise concern.

Marel’s pre-let at 2020 The Crescent

Icelandic food processing equipment manufacturer, Marel, has secured 6,638 sq ft of space at 2020 The Crescent on Birmingham Business Park – the largest transaction of the quarter. The property is now set to be refurbished to a high standard, in order to welcome its new occupier. The second and third largest lettings were both secured at Blythe Valley Business Park – transport solutions provider Zenith took 5,493 sq ft at One Central Boulevard and packaging company, DS Smith, took 5,327 sq ft at Cornwall House.

A quiet quarter from the corporates, but larger deals lie ahead

Larger transactions for Solihull office space were absent from the Q1 figures – but sizeable requirements are in the marketplace. There are currently at least 3 or 4 enquiries of 20-30,000 sq ft which are expected to be fulfilled in the coming months. Property decisions can often be put off in the run up to events such as an election or a referendum, and the upcoming vote on the EU and the economic uncertainty surrounding the possibility of Brexit is a prime example.

Mark Robinson, KWB Director, said: “We are currently dealing with several larger office enquiries for the area, which have been in the market for some time. Whilst we hope to secure them within Q2, it may be that Brexit-cautious SMEs could push signings into the second half of the year.

“The feeling within the UK office market, is that lack of activity, particularly from occupiers who operate internationally, is due to the approaching EU referendum on 23rd June. We are confident that, once this has taken place, enquiries will pick up and leases will be signed.”

Freehold’s security popular with SMEs and landlords alike

As shown in the table below, freehold transactions for office space in Solihull were plentiful in Q1 2016. Three of the individual office buildings at The Pavilions were acquired – leaving only a single property remaining at the Solihull courtyard office scheme. This showed a strong desire from owner occupiers to buy office stock when available. Supply of these small, self-contained freehold buildings is now incredibly limited – this has driven up the price per sq ft on the properties that remain.

Office building Location Size
(sq ft)
Occupier
Unit 8 The Pavilions Solihull 4,100 Private individual
Unit 11 The Pavilions Solihull 3,164 Private individual
Unit 9 Quartz Point Solihull 2,730 Hitachi
Unit 9 The Pavilions Solihull 1,925 Zest Projects
8 Hockley Court Solihull 1,044 Leap IT

Offering these buildings as freehold is ideal when the market has been so active. The market’s strength secures a strong return on investment for the landlord, whilst occupiers gain both an investment and long term security in their occupancy – in a market where demand is high.

Lack of supply will have developers seeking pre-lets on new builds

With little new space available in Birmingham’s out-of-town office market, developers are giving real consideration to new build space. Should developers decide to do this, once the last pieces of existing stock have been depleted, they’re likely to seek a pre-let before breaking any ground. Rather than speculatively developing, as seen in Birmingham’s city centre, this is a more secure approach to developing new-build offices, and it could also potentially offer interested occupiers some flexibility with the final specifications and layout of the property.

Offices in Redditch and Bromsgrove remain dormant

Both Redditch and Bromsgrove saw no office space sales or lettings in Q1 2016 according to the market transaction figures. Supply of office stock in these areas has reached minimal levels – this has led existing occupiers to hold on to what they’ve got and effectively bring the office market in the area to a halt.

KWB achieves 72% of transactions for offices in Solihull by square footage

KWB secured 30,528 sq ft (72%) and 9 (64%) of the 14 deals for the quarter, including the largest transaction related to Marel at Birmingham Business Park. KWB continues to be the agency achieving the largest share of office space transactions in this area – with extensive success at Birmingham Business Park in recent years.

Mark Robinson, KWB Director, said: “We are pleased to have secured the deals that we have done, over the opening three months of 2016, in spite of such a quiet quarter. Although transaction figures are low, I don’t foresee a downward trajectory for Birmingham’s out-of-town office market – far from it.

“Generally speaking, interest in Solihull and the M42 corridor is still very strong. Office stock at the usual hotspots, such as Birmingham Business Park and Blythe Valley, remains highly desirable and that’s not about to change. However, the national rate of new office space enquiries is in a temporary Brexit-charged dip.

”Q2 could still be a respectable quarter, should the deals at the top end of the market come to a close in the time-frame. We are handling several of these, and it’s certainly possible – but the second half of the year is likely to be significantly more prosperous. We expect to see new opportunities for high quality office stock arising towards the end of the year. These are likely to be snapped up, perhaps even as pre-lets, relatively quickly.”

For more information

See full details of the transactions for office space in Solihull and M42 corridor.

Download KWB Office Market Review 2015.

For more information on office space in Solihull and the M42 corridor, please contact Mark Robinson on 0121 212 5994 or email mrobinson@kwboffice.com.