M42 and Solihull office market research – quarter 2 2016

The largest open market deal for offices on Birmingham Business Park, in nearly two years, helped Birmingham’s out-of-town office market achieve a Q2 total that was two and a half times that of the previous quarter.

Our latest Solihull office market research confirms that, at 105,420 sq ft, Q2 comprised a surprisingly healthy level of take-up for a quarter that saw SMEs ‘quieten down’ in anticipation of the EU referendum.

Highlights of M42 and Solihull office market research

• Biggest letting on Birmingham Business Park in nearly two years
• Birmingham Business Park takes dominant share (55%) of out-of-town office transactions
• Substantial letting expected for Q3 – hints at decent quarter ahead
• Low enquiries level may cause out-of-town office market to fall short of annual long term average

A great quarter for the out-of-town office market

2016 got off to a slow start for offices in Solihull and the M42 corridor, with Q1 figures for sales and lettings that totalled 45,292 sq ft. Q2’s total of 105,420 sq ft, and an average letting size of 7,027 sq ft, were the result of several requirements finally being met – whereas fresh, new enquiries have been thin on the ground in recent months, due to the EU referendum.

Energy company, Uniper’s lease, of 32,692 sq ft at Compton House, accounts for nearly a third of Q2’s total, but with four lettings over 10,000 sq ft, it has been a great quarter for larger lettings.

Uniper and Birmingham Business Park

KWB and CBRE secured the largest transaction on Birmingham Business Park in nearly two years, with the letting of 32,692 sq ft at the Park’s Compton House to energy company Uniper – following their separation from E.ON. Uniper comes to Birmingham Business Park from E.ON’s offices at Westwood Business Park, Coventry.

KWB advised property owners, over the past 18 months or so, that thorough refurbishment of out-of-town office space, such as that on Birmingham Business Park and the surrounding areas, would secure larger occupiers, ahead of the competition. The refurbishment of Compton House made it a very appealing prospect for Uniper – without this investment, occupancy may not have been achieved.

More than half of the office space transacted in the out-of-town office market was secured at Birmingham Business Park – 57,875 sq ft.

Availability of office space on Birmingham Business Park is now at its lowest for over a decade, currently standing at just 11% – representing 210,000 sq ft. KWB also has several significant enquiries that it is currently dealing with, which are expected to see that amount of available space drop even further. Demand for office space at Birmingham Business Park has been high in recent years due to the affluence of its existing occupiers and its excellent transport links, being close to Junction 6 of the M42, Birmingham Airport and International train station.

Things are going quiet, but Q3 shouldn’t disappoint

With a substantial post-Brexit letting in the out-of-town office market soon to be announced, the Q3 figures are expected to be respectable. However, enquiry levels have dropped in the area, as they have done in other areas, but the impact on transaction figures will not be felt until Q4. As such, given a quiet Q1 and respectable Q2, it is possible that the out-of-town office market will still fall short of achieving its annual long term average.

KWB achieves 70% market share of square footage transacted in Q2

With lettings totalling 73,960 sq ft, KWB secured 70% of the 105,402 sq ft of office that was transacted in Birmingham’s out-of-town office market in Q2. This 70% of square footage was over 8 transactions, 53% of the total number of 15 transactions for the quarter.

KWB Director, Mark Robinson, pictured right, commented: “We are very pleased with our market share in the key out-of-town areas of Birmingham this quarter. Occupiers and landlords recognise our extensive knowledge of this region of the Midlands, and of its office market, and that helps us to consistently achieve this level of result.

Outlook

SMEs have been quieter in the market place throughout 2016, in anticipation of the referendum – however, we would now expect there to be a slowing of enquiries across the board – with even larger corporates ‘pulling in their horns’. There is likely to be a behavioural shift in some SMEs, where they will opt to seek space in serviced offices such as 1310 Solihull Parkway on Birmingham Business Park – the benefit of serviced offices is the increased flexibility and decreased level of commitment over a traditional lease. which is appealing to small-medium sized companies at times of low economic growth or economic uncertainty.  Going forward, businesses will be looking to see the financial and political sectors stabilise, before making any new long term commitments to property or, indeed, location.

See full details of the transactions featured in our M42 and Solihull office market research, comprising office space in Solihull and the M42 corridor.

For more information, please contact Mark Robinson on 0121 212 5994 or email mrobinson@kwboffice.com.