M42 and Solihull office market research – quarter 1 2018

At 91,055 sq ft, the total square footage for the M42 and Solihull office market in Q1 2018 is approximately 35% up on the quarterly average for 2017. As in Birmingham city centre, many of the transactions in Solihull and the M42 corridor were lease event-driven, with companies acquiring better quality, and more efficient, office space.

The transactions secured over the quarter demonstrate the robustness of the Solihull office market, and continuing diverse range of occupiers. Furthermore, they indicate that companies in the IT/TMT sector are prospering – with the significant expansions of both Blue Systems and Wavenet.

Large deals and a healthy quarter

Matching Birmingham city centre, the M42 and Solihull office market achieved four office space transactions over 10,000 sq ft. This was an excellent achievement for the market, which only achieved nine deals over 10,000 sq ft for the whole of last year.

This strong level of larger transactions is responsible for Q1 2018’s total of 91,055 sq ft – meaning that the 2018 market has already achieved over a third of last year’s total of 269,498 sq ft. Should the market replicate this across all four quarters, it will secure over 100,000 sq ft more in transactions than last year, an increase of 35%.

The following table puts this year’s quarter into context – in square footage, it is not only significantly above average, based on first quarter performance over the last 7 years, it is also the largest first quarter since 2013:

Quarter Office space (sq ft) Share of annual total Transactions Average size (sq ft)
Q1 2018 91,055 13 7,004
Q1 2017 68,502 25% 12 5,708
Q1 2016 45,292 14% 15 3,019
Q1 2015 25,897 6% 10 2,590
Q1 2014 60,539 15% 18 3,423
Q1 2013 94,827 42% 18 5,268
Q1 2012 158,409 49% 15 10,560
Average 77,789 25% 14 5,367

Looking at the four largest transactions again, which in themselves totalled 72,378 sq ft, these were more than the square footage of an average quarter in 2017 – which was c. 67,000 sq ft.

Office building Size (sq ft) Occupier Business sector
Trinity Central 25,200 Beiersdorf UK Health & beauty
Zenith 23,749 Bizspace Serviced offices
31 Homer Road 12,796 Blue Systems IT/TMT
One Central Boulevard 10,633 Wavenet IT/TMT
Total 72,378

Beiersdorf moves to Trinity Park

Skincare company and home of household name brands Nivea and Elastoplast, Beiersdorf UK’s lease on 25,200 sq ft at Trinity Central on Trinity Park, next to Birmingham Airport and International train station, was the largest Solihull office market transaction of the quarter. The letting was lease event-driven, and represented a flight to quality – with the size of office space being a ‘like-for-like’ swap.

Beiersdorf’s new offices represented a more efficient and higher quality offering than its existing premises at 2010 Solihull Parkway on Birmingham Business Park. The relocation was chosen over improving its existing office space, as the refurbishment of 2010 Solihull Parkway would have been too disruptive to its operations at the time.

Solihull office market - Zenith House serviced offices Solihull

Zenith, Solihull

Solihull gets more serviced offices

Serviced office operator, Bizspace, acquired Zenith, a building providing 25,200 sq ft of Solihull office space. Bizspace will be repositioning, refurbishing and fitting out the building in order to provide high quality serviced offices.

Last year, we identified that, whilst Birmingham city centre responded throughout 2017 to the trending demand for serviced offices, the Solihull office market has until now been a little slow on the serviced office uptake.

Solihull’s serviced offering now includes Zenith, and we would expect to see further acquisitions from serviced office operators – should the right space be available.

It’s quiet in the middle of the market

In recent quarters we’ve begun to see some symmetries between the Birmingham and Solihull office markets that have not previously existed. The Q1 2018 transactions for the Solihull office market highlight a significant gap within the market – as the first deal below 10,000 sq ft was the letting of 3,466 sq ft to manufacturer of timber interior and exterior doors, windows and stairs, Jeld-Wen at Radcliffe House.

The reasons behind this drought of transactions between 3,500 and 10,000 sq ft seem much the same as those of Birmingham city centre in the 5,000-15,000 sq ft bracket – lack of supply and discerning occupiers.

Expansions and the IT/TMT sector

Expansion is a common theme across the quarters in the M42 and Solihull office market. It could be said that this is the product of occupiers taking strictly only what they need in terms of the size of office space.

We have observed that occupiers are reluctant to take more space than needed, and if a piece of space is greater than their requirement, they will rule it out. Whilst the extra space could provide ‘growing space’ or even accommodate a sublet – that is seen simply as extra money and extra hassle.

Blue Systems, who trade as Sales-i, creating sales analytics software for wholesale distribution – with customers such as Warwickshire-based Purity Brewing – are relocating to 12,976 sq ft of newly refurbished office space at 31 Homer Road in Solihull town centre, moving from Prologis House at junction 4 of the M42.

Voice, data and cloud solutions provider, Wavenet, which leased 10,633 sq ft this quarter at One Central Boulevard on Blythe Valley Business Park, is relocating a short distance away from 3 The Green in Solihull. Wavenet acquired its existing offices in Q2 of 2013 on a 5-year lease. The relocation to One Central Boulevard represents an expansion to nearly double the amount of space – having previously occupied 5,657 sq ft at 3 The Green. The doubling of Wavenet’s offices and workforce in a 5-year period is indicative of the prosperity that TMT companies have enjoyed in the area.

Solihull office market - Friars Gate offices Solihull J4 M42

Friars Gate

Thyssenkrupp’s acquisition of 3,339 sq ft also represented an expansion at Friars Gate, where it was already based. The lift manufacturer had previously taken space in Friars Gate when it acquired 4,100 sq ft in Q2 2015. As such, this represents almost a doubling of its stake at Friars Gate and brings the total office space it occupies to 7,439 sq ft.

Bromsgrove and Redditch are quiet once again

The areas outside Junctions 4-6 of the M42 are quiet yet again, as Q1 2018 saw just one reported letting within the Redditch and Bromsgrove areas of the M42 and Solihull office market. Business funding company, Boomerang Support Services, took 2,376 sq ft at 9 The Croft in Bromsgrove. However, we know that other deals in this area are yet to be reported.

There is a stark contrast between the frequency of transactions in the Bromsgrove and Redditch office market and its industrial market. Redditch and Bromsgrove are areas in high demand within the industrial world, and whilst industrial supply is thinner on the ground than the market would want, deals are still taking place.

Some pieces of refurbished office space are beginning to come to the market, such as The Old Courthouse, St Johns House and 5 The Courtyard, and these are – unsurprisingly – receiving a good level of interest.

M42 and Solihull office market - The Old Courthouse, offices Bromsgrove

The Old Courthouse, Bromsgrove

The Old Courthouse, as its name suggests, formed part of the old courthouse in Bromsgrove and is a building steeped in history. Having been converted into stunning, modern office space, it still retains many of its period features, including an attractive vaulted ceiling, lit by feature lighting, original staircase and parquet flooring in part. As a building, it offers tremendous potential for those occupiers, such as designers, architects or marketing companies, looking for offices in Bromsgrove that represent unique, character space that they can fit out and tailor to their own design vision.

It’s worth noting that the office market within Worcestershire is also very quiet, and it is a severe lack of supply across all these areas which makes it near impossible for deals to take place.

Small, high quality office space

Smaller office suites in and around Solihull are in short supply and, as such, any high quality office space up to around 3,000 sq ft is very popular. We see this in the Q1 figures of the Solihull office market, with this bracket doing very well. We also see the most availability of this size of space in Solihull town centre.

Solihull office market - Dominion Court offices Solihull town centre

Dominion Court, Solihull

A couple of examples in Q1 2018 of companies relocating to small suites of high quality office space in Solihull town centre would be manufacturer, Athlone, which took 1,494 sq ft at 43 Dominion Court – relocating from Equipoint, and security company, ESG Security, which took 2,690 sq ft at 691-693 Warwick Road, moving from offices at Elite House in Acocks Green.

Outlook

Solihull’s robust and reliable office market is unlikely to deliver quarters substantially greater than this, although we are aware of larger lease events on the horizon, which may result in some headline transactions before the year is out.

Solihull occupiers are embracing the idea of ‘agile working’, meaning that not all the staff are in the office all the time – or at the same time. However, whether this will begin to impact on property decisions such as expansion, is a developing story.

Unless the Redditch and Bromsgrove office market receives a surprise shot-in-the-arm in availability, it will not make a turnaround in the months to come – there simply isn’t the space currently available to make it possible.

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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