M42 and Solihull office market research – quarter 2 2017

Quarter 2 saw the largest transaction for offices in the Solihull office market for 12 months, with the letting of 20,774 sq ft to BCA Logistics at 1320 Solihull Parkway on Birmingham Business Park. This was also almost 50% more than the largest transaction in the Birmingham office market in Q2 17.

At 140,010 sq ft year-to-date, the Solihull office market is currently running slightly short of its long-term average, but only slightly. Due to its diverse range of occupiers, the Solihull office market is relatively unaffected by the economic uncertainty that is, in contrast, somewhat affecting the Birmingham office market.

Office lettings at Birmingham Business Park bounce back

Birmingham Business Park (aerial view pictured below) once again secures the largest transaction in Solihull, reaffirming its position as the foremost office park in the Solihull office market. This letting represents the largest office space transaction on Birmingham Business Park, and indeed the whole Birmingham out-of-town market since Goodyear, last summer. The top three transactions for the quarter are as follows:

BCA Logistics (formerly British Car Auctions), back in 2013, relocated 110 staff from Measham and Bordesley Green in Birmingham to Parkside on Birmingham Business Park. Four years later, they have outgrown their offices and now almost doubled their occupation on the Park.

BCA has now relocated to 1320 Solihull Parkway on Birmingham Business Park, as Parkside could not facilitate its expansion, due to Changan’s purchase of the whole Parkside development. Solihull Parkway offers BCA larger floorplates of 15,000 sq ft, compared with Parkside’s 11,000 sq ft.

Engineering and construction giant, and recently announced HS2 contractor, Costain, has relocated its Coventry operations to a regional office at Bishops Court. This represents its second relocation to Birmingham Business Park, with office space already taken in 2014 at 2665 Kings Court.

Birmingham Business Park’s variety of office space options and its connectivity make it an excellent location for different divisions of the same company to be clustered together.

Facilities management company, Diamond FS, acquired the freehold at 2220-2226 The Crescent, comprising 6,384 sq ft across four office buildings in a self-contained terrace. This represented the larger of the two transactions of freehold office space in the quarter.

The previous quarter saw a significant number of freehold transactions, thought to be in response to the sustained demand and diminishing supply within the Solihull office market. Owner occupiers in this area have both the security of their tenancy as well as a safe investment – as the market drives up the value of commercial properties, over time.

Towergate Insurance upgrades

Towergate Insurance has relocated to Avon House in Shirley in a drive for better efficiency and higher quality office space. The space efficiency of their new offices enables a downsize in square footage, allowing them to increase the budgeted cost per square foot and benefit from an improved specification. Towergate’s new offices provide air conditioning, raised access floors and natural daylight – having come from a quasi-retail location in Hall Green.

Companies seeking higher quality office space has been a common trait in those downsizing or consolidating. A smaller overall stake in office space allows them to afford better quality accommodation, at a higher rate of rent per sq ft, but also with reduced running costs.

Inward investment for Solihull

Continuing the Solihull office market’s tendency to attract inward investment, we see companies coming to the area for the very first time.

• Goldbeck Construction, headquartered in Germany, has relocated its UK arm from Milton Keynes to Solihull’s Eagle 2
• Ferranti Computer Systems, headquartered in Belgium and specialists in meter data management for energy providers and utility companies, are also new inhabitants of the M42 corridor, moving to Birmingham Business Park’s 1740 Solihull Parkway

The M42 and Solihull office market has much to offer companies who operate in the Midlands or across the country. Transport links and connectivity are huge selling points for the area. Birmingham Airport, Birmingham International train station and Junction 6 of the M42 are some of the biggest benefits of the location of office parks such as Birmingham Business Park and Blythe Valley Park, as well as the variety of amenities nearby, most notably Resorts World, the NEC and the Genting Arena.

SMEs drawn to offices in Solihull town centre

With its range and quality of local amenities, Solihull town centre represents a very attractive location for small to medium sized businesses, with four transactions this quarter. In the past, we have commented on how Solihull town centre has been virtually immune to recessionary pressures.

Office space expansions

A number of the lettings this quarter represent expansions, increases in the office space stake that companies have at their existing location or at a new one. Expansions show that companies in this area are doing well, as well as indicating the general prosperity of the Solihull office market.

As previously mentioned, the office relocation of BCA Logistics to 1320 Solihull Parkway saw its office stake increase by 80%, in the largest transaction of the quarter. Others included:

• Thursfield Solicitors expanded within its existing office location at 9 The Courtyard, taking a further 3,128 sq ft.
• Construction, refurbishment and fit-out company, MAC Group, expanded out of serviced offices at Blythe Valley, now occupying 1,601 sq ft at 43 Dominion Court in Solihull town centre.

Offices in Redditch and Bromsgrove

As with Q1, the market for offices in Redditch and Bromsgrove saw just a single transaction in Q2 – a freehold purchase of 3,150 sq ft at Units 1&2 Chestnut Court in Sambourne, Redditch by, financial advisors, Pinnacle Financial Planning.

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 office space is so limited – irrespective of its size or quality – and options so few, that lettings and sales only trickle through.

It’s no surprise then, with this in mind, that the only transactions so far this year have been freehold purchases. Last quarter, it was a purchase of 2,418 sq ft at 10/11 The Oaks in Redditch by a private individual – this quarter, an owner occupier. With office space in short supply, freehold purchases offer both a sound investment proposition and security of tenancy.

Outlook

The M42 and Solihull office market has no lack of demand, but the lack of supply is very real.

Recently completed and forthcoming office refurbishments, such as One Central Boulevard at Blythe Valley Park, 2800 The Crescent at Birmingham Business Park, and Trinity Central in Solihull will add much-needed, high quality office stock to the Solihull office market, but these are likely to be snapped up very quickly. These are welcome contributors to the transaction figures of the coming few quarters, but not a solution to the ongoing demand for office space in the area.

Furthermore, whilst we see HS2 contractors locate administrative divisions within Birmingham city centre, contractors are expected to require ‘project space’ to deal with ‘on the ground’ logistics, as work is subcontracted out and other companies brought into the fray. This could, potentially, be a real ‘shot in the arm’ for the M42 and Solihull office market, involving substantial inward investment.

Beyond that, projects such as the proposed mixed use development, UK Central, will depend on the success of HS2 and its Solihull station, Interchange.

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

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