M42 and Solihull office market research – quarter 3 2017

Quality not quantity typifies the Solihull office market transactions for Q3 2017, with an impressive top deal and an average transaction size of 7,845 sq ft.

Far and away the biggest story of the quarter is the letting of over 40,000 sq ft to local sports clothing company, Gymshark. The letting ensured a healthy quarter for the market, in a similar fashion to the boost given to the Birmingham office market in Q3 by the landmark pre-let of 3 Arena Central to HMRC.

Gymshark move to a bigger pond

Gymshark delivered the largest letting, which equated to over half the total office space transacted in the quarter. Securing a new Solihull headquarters on Blythe Valley Business Park, Gymshark signed a ten-year lease for 42,408 sq ft, two-storey offices at Trigen House which has undergone a £3 million refurbishment.

The sportswear firm has enjoyed rapid growth in the five years since it was founded, with its range of sports clothing and ‘active wear’ proving increasingly popular due, in part, to the company’s intense social media activity. As a result, Gymshark outgrew its existing home at Unit 1 Brooklands in Redditch, and will relocate to the larger office space in March 2018.

With some 150 current staff in the company, Gymshark clearly forecasts exponential expansion of its team with room for in excess of 300 new recruits at Trigen House.

This represents one of the largest lettings on the M42 corridor in the past five years – sitting beneath 2015’s transactions of 113,657 sq ft to Interserve at International House and 46,041 sq ft to Xoserve at Lansdowne Gate.

Gymshark is a success story for the Solihull region, demonstrating the prosperity experienced by local companies starting up with aspiration and organisation. With customers in more than 170 countries and a predicted turnover of £42 million for 2017, it is the current holder of the Fast Track 100 award for Britain’s fastest-growing private enterprise.

Gymshark will be in good company at Blythe Valley Business Park with fellow occupiers including accountancy firm PKF Cooper Parry and healthcare and research group Abbott Global.

Trigen House

Birmingham Business Park 

Whilst Birmingham Business Park does not currently have a suitable, readily available office property to welcome a 40,000+ sq ft letting, such as Blythe Valley has been able to offer Gymshark, it has a good number of high quality pieces of office space for medium-sized occupiers. As such, it was the most popular location for lettings in Q3 2017.

Securing the quarter’s 2nd, 3rd and 4th largest transactions, Birmingham Business Park is still a ‘go to’ location.

John Sisk & Sons, which has been a longstanding occupier within Birmingham Business Park, has taken the freehold of 8,826 sq ft of offices at 2410 Regents Court. The construction firm had been seeking an appropriate property to purchase for some time, and other companies are likely to be or have been in a similar position, as detailed in the below section on freehold space.

Management consultants, Capp & Co, also took the opportunity to purchase office space at Regents Court on Birmingham Business Park and, in doing so, set in motion its relocation from Coventry’s The Venture Centre.

Park Square

Freehold availability rising

KWB has noticed a significant increase – over the past 18 months – of properties being snapped up on a freehold basis. Until now, the number of properties available freehold in the Solihull office market has been lacking – and without the supply, the demand hasn’t been satiated.

The reason that so little of the office space in Solihull and the M42 corridor has been available is because the return on investment that freehold prices have offered has been far less than that of leasehold arrangements. However, with demand for office space in the region being high, and available space has dried up, this has pushed up the freehold price that an investor could expect.

As a result, some landlords have re-evaluated their position on their offices and considered offers for a freehold sale – and the response has been strong. In Q3, freehold transactions in the Solihull office market were:

• John Sisk & Son – purchasing 8,826 sq ft at 2410 Regents Court, Birmingham Business Park
• Capp & Co – purchasing 8,154 sq ft at 2230 Regents Court, Birmingham Business Park
• Not disclosed – purchasing 2,450 sq ft at 6 Regents Court, Redditch

In this quarter, the second and third largest deals – both at Birmingham Business Park – were purchases rather than lettings. The total amount of freehold office space transacted in the Solihull office market so far this year is 46,305 sq ft – across 10 purchases – so this could be a growing trend from here on out.

Redditch and Bromsgrove

Three deals took place across the Redditch and Bromsgrove office markets in Q3 – 3,500 sq ft was let to an undisclosed construction company at Unit 5 Topaz in Bromsgrove, 2,600 sq ft was taken by foster care company, CAF, at Ladybird Barns and 2,450 sq ft at 6 Regents Court, Redditch was purchased as a private investment.

Demand remains present for offices in Redditch and Bromsgrove – though, sadly, so does the drought of available office space.

With Gymshark now set to vacate their offices at Unit 1 Brooklands, this could add some much-needed office space to the Redditch market, and we wouldn’t be surprised if there is instant interest in the property.

Outlook for Solihull office market

The total amount of space transacted in the Solihull office market in the year to date stands at 218,462 sq ft. If the market achieves a quarterly transaction total in Q4 that is similar to the previous 3 quarters, it may fall just short of the long-term average of c. 305,000 sq ft.

Supply continues to be an issue. However, with a few pieces of office space set to come back to the market – the largest being 30,000 sq ft on Birmingham Business Park – it may galvanise the market in the coming quarter and the new year to come.

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.

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