In a landmark year for office space in Solihull and the M42 corridor, KWB office property specialists have continued to dominate the market by achieving 60% of the total office space transacted during 2014.
It was an exceptional year for Birmingham’s out-of-town office market, with 418,000 sq ft of office space transacted over the course of the year. This figure is nearly double the long term average of 220,000 sq ft for the area, in annual office space take-up.
KWB has performed consistently throughout 2014, culminating in their tally of 250,000 sq ft out of the 418,000 sq ft, or 42 of the total 90 deals completed in 2014.
A significant part of this achievement came from commercial property developer Canmoor retaining KWB as agents on Birmingham Business Park, which saw a complete turnaround in its fortunes in 2014.
2014 research highlights for offices in Solihull and the M42 corridor
Birmingham Business Park’s fortunes turn 180 in the 12 months since Canmoor’s acquisition
Since its purchase of Birmingham Business Park 12 months ago, Canmoor has seen a huge turnaround for the scheme. Since the acquisition, 140,000 sq ft of office space has been let at the Park, which accounts for a 40% share of the Solihull office market deals in this period.
Is Solihull’s office space market on a cycle of success?
It would appear that 2014’s high transaction figures are evidence of a five-year cycle that the Solihull office market has adopted. We saw a particularly high number of lease events occur this year and, as a result, we saw a high number of office space transactions. This also occurred in 2004 and 2009, with a higher rate of lease ends in these years, than in the intervening time, being responsible.
Having said all this on the prosperity of the Solihull office market in 2014, we are expecting strong results in Q1 2015 when a lot of the enquiries which were active towards the end of 2014 come to fruition, and this bodes well for the year.
Consolidation, consolidation, consolidation
In Q4, West Mercia Housing sold their Barnsley Hall offices in Bromsgrove to Redditch & Bromsgrove Clinical Commissioning Group (RBCCG), a transaction totalling 7,157 sq ft. This transaction was part of a process that the overall company was undergoing to consolidate its workforce and operations into 4040 Lakeside on Birmingham Business Park, a single building of 27,134 sq ft which had recently been vacated by IMI.
Similarly, Cala Homes took, cast iron cooker manufacturer, Aga’s 11,480 sq ft of office space at 4 Arleston Way in Shirley, Solihull. This move by Cala Homes was made to facilitate the consolidation of their smaller offices in Henley-in-Arden and Redditch into a larger property.
These are prime examples of the trend that we have seen throughout 2014, which has led to so many deals being struck in Solihull and the M42 corridor.
Office space in Solihull at critically low level
With demand for Grade ‘A’ office space now outstripping supply, after a long period of time with this space laying vacant, and office stock at such low levels, new speculative developments of office space in Solihull are now called for, particularly if the level of activity in 2014 continues into 2015. Incentives have reduced during the course of the year and landlords are not only now standing firm, but are looking for rental growth for the first time since 2006-2007.
Design and build offices in Solihull back on the agenda
We are now having serious conversations about design and build office schemes on M42 business parks. Occupiers are frustrated by the lack of choice of office space in Solihull, especially at junctions 4 and 6. Owners of large un-refurbished office buildings should also be looking at lease events as an opportunity.
2014 research highlights for offices in Birmingham city centre
Multiple large office space transactions in final quarter mean a complete turnaround for Birmingham city centre office market in 2014
Q4 saw five office space transactions over 20,000 sq ft giving a massive boost to the year’s figures; these five deals totalled 213,900 sq ft. With over 700,000 sq ft transacted in Birmingham city centre throughout 2014, this has been the best year for the office market since 2008, a statistic which looked less than likely all the way up until the end of the third quarter.
|Year||Total transactions for office space in Birmingham city centre (sq ft)|
HS2 deal closes, accounting for a third of the quarter’s square footage let!
The most significant deal of the quarter was HS2’s leasing of 97,958 sq ft of office space at Two Snowhill. This deal has been reported on throughout the year and was finalised in the last quarter, testament to the longer due diligence periods for larger office space transactions.
Office refurbishment and new build back on the agenda
We anticipate that more property owners of second-hand stock will want to capitalise on Birmingham’s considerable, internal investment and the rising demand for high grade office space, in the wake of HS2, by refurbishing their office properties. Supply of second-hand office space will, in turn, start to be eroded. We also foresee this prompting commercial property developers to seriously consider new build, Birmingham city centre office schemes, as we view this as a highly opportune time to start building.
Return of the cranes?
The only confirmed crane shortly to be visible in our skies is that over Paradise Circus, (to be renamed ‘Paradise’), which is expected to contribute 250,000 sq ft of new, Grade ‘A’ office space by 2018. The outlook is very positive for Paradise, which will link the established core of Birmingham city centre to Brindleyplace.
However, we are now seeing real response, from developers, to the city centre office space shortage; with a re-submission by Rockspring and Sterling for planning permission to create 200,000 sq ft of office space, in a single building, at the site of the long vacant, Natwest Tower, 10 Colmore Row, which is thought would be speculatively developed. Furthermore, we believe IM Properties are set to announce plans for a speculative office development at 55 Colmore Row.
Birmingham office rents set to improve
We’ve seen demand and supply for new build, Grade ‘A’ office space over the course of the year reduce incentives and consolidate rental levels in the high twenties, per sq ft. We predict this to increase slowly over the coming months and years, and in the immediate term an increase of 5-10% over the coming 12 months.
Harder to shift fringe office properties made residential, as residential market strengthens
During 2014, we’ve seen the growth in demand for residential space within Birmingham city centre and this has driven a trend of repurposing of office stock as residential space. Seven Capital has taken this measure with properties such as 1 Hagley Road, Devonshire House, Broadway and Britannia House, four buildings totalling somewhere in the region of half a million sq ft. This trend is removing less desirable, fringe office stock from the market.
Outlook for Birmingham office market in 2015
2015 is expected to be a big year for Birmingham as the Big City Plan progresses. The larger deals we saw at the end of 2014 are expected to continue through into the New Year. The tram system linking Snow Hill to New Street is due to be completed, as well as the new John Lewis department store, above New Street Station.
We also expect consultants to the HS2 project, the first of which is already looking for office space in Birmingham, to become more active in the market. Exciting times lie ahead.
To see full details and further commentary of the transactions for office space in Solihull and the M42 market, and Birmingham city centre and Edgbaston, visitwww.kwboffice.com/research.
For more information, please contact Mark Robinson on 0121 212 5994 or email firstname.lastname@example.org.