M42 and Solihull office market research – quarter 1 2017

With a level of take-up that was right on the mark for the long-term average, the M42 and Solihull office market, once again, proves its ability to remain consistent. The biggest headline of the quarter is the news of IM Properties’ decision to speculatively develop new office space on Blythe Valley Business Park, the first speculative development on the M42 corridor in nearly 10 years.

Solihull office market remains fighting fit

In Q1, the Solihull office market saw a good mix of larger occupiers, peppered in with smaller ones and, as we have come to expect, Solihull continues to house a diverse range of occupiers. This appeal, to such a wide variety of businesses, is a key factor behind why the office market in this area proves to be so sustainable.

Throughout 2016, the market for Solihull offices stood firm and delivered a respectable transactions total of 312,297 sq ft for the year. The office market in this region showed the same defiance that it demonstrated through the last recession – during which it appeared almost untouched.

In Q1 2017, the top three transactions by size included:

We comment below on the inward investment office relocation at Blythe Valley Business Park. L&G relocated a short distance into a similar amount of space from Warwick House, where another occupier was looking to expand. SOTI increased their office space by 2,000 sq ft by becoming the first occupier after practical completion at St Alphege Place, a back-to-frame refurbishment by IM Properties in Solihull town centre.

First speculative office development in nearly 10 years

IM Properties has decided to move ahead with its plans to speculatively develop 15,000 sq ft of new office space on a plot at Blythe Valley Business Park. This represents the first speculative development since FORE offices completed in 2008 at Junction 4 of the M42.

The high level of activity in the Solihull office market, in recent years, has seen supply of office space deplete significantly – with no vacant, new office space remaining. Until now, discounting a couple of major pre-lets, commercial property developers have avoided speculative development – choosing instead to carry out extensive refurbishments on their existing space. This approach has proven very successful, but stock is now so limited that new build options are being considered.

The deciding factor that motivated IM to go ahead and be the first to speculatively develop in such a long time, was the pre-letting secured to ProLogis at the end of last year. ProLogis agreed terms on 23,000 sq ft of new build offices at Plot F on Blythe Valley, and with the lettings secured elsewhere on the Park in Q1 2017, speculative development was deemed to be justified by the market.

Solihull welcomes inward investment office relocation

Relocating from 8 Calthorpe Road, Edgbaston, is PKF Cooper Parry, who took 17,810 sq ft at Blythe Valley Business Park’s One Central Boulevard in the largest transaction of the quarter. With its head office in Nottingham also located on a business park, PKF decided to relocate their Birmingham branch to an out-of-town business park location, rather than a city centre site.

Businesses relocate to Birmingham’s out-of-town offices for multiple reasons. Business parks, such as Blythe Valley and Birmingham Business Park, benefit from superb transport links supplied by Birmingham Airport, Birmingham International train station and Junction 6 of the M42, as well as the variety of amenities nearby, most notably Resorts World, NEC and the Genting Arena.

Freehold purchases take 22% of M42 and Solihull office market

With available office space across Birmingham’s out-of-town office market running low, we see a continued trend of purchases rather than lettings – 22% of the square footage for the quarter was acquired through freehold purchase.

Companies purchasing offices here are looking to secure long term occupation of a building, as well as take full advantage of the investment opportunity that a commercial property in Solihull and the surrounding area offers.

Adam Continuity purchased 3 & 4 Highlands Court, the largest freehold acquisition in the quarter, as both a regional office and one of its disaster recovery centres. Having moved ‘around the corner’ from serviced offices in MSO Workspace in Cranmore Place, this acquisition represents a big expansion for them. Adam Continuity provides a business continuity service for businesses, should they experience a catastrophic failure of their existing office facilities. When this occurs, within hours, they can be back up and running with exact copies of their systems running on workstations within the disaster recovery centre.

Unit 9 The Pavilions is the third office building that this particular owner occupier has now acquired, bringing their total to 6,500 sq ft – evidence of the company’s continuing growth and success.

Offices in Redditch and Bromsgrove

The market for offices in Redditch and Bromsgrove saw just a single transaction in Q1, a purchase of 2,418 sq ft at 10/11 The Oaks in Redditch by a private individual.

There is plenty of demand for offices from companies within these areas, as well as those wanting to relocate to the area. However, as we have detailed in the past, the available space is so limited – irrespective of its size or quality – and options so few, that lettings and sales only trickle through.

Offices here are not generally being refurbished to the same extent as those elsewhere in the M42 corridor – partly because there are less opportunities to do so – meaning that the companies they appeal to may differ from those attracted to the high quality refurbished office space at Birmingham Business Park, Blythe Valley, and others.

Outlook

The outlook for the M42 and Solihull office market for the remainder of this year reflects a good level of demand, due to forthcoming lease events in 2018, where occupiers are now starting to review alternatives for office space. They will be looking to improve on the quality of office space that they occupied in 2008 and 2013, which would not have been at the level of specification on offer today. With office refurbishments only having started in the last two years in this area, occupier expectations will now be higher.

It will be interesting to see how other commercial property developers in the M42 and Solihull office market respond to IM Properties’ decision to speculatively develop at Blythe Valley Business Park, and how occupiers will react to the opportunity to occupy new build office space.

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.