Birmingham saw over 100,000 sq ft of office take-up in Q1 2013 - double the level of deals compared to the same period last year.
Despite this, Ian Leather, Regional Director of Office Agency at Lambert Smith Hampton, said pessimists in the market are still predicting the lowest annual take-up in recent years for 2013.
“Birmingham has, in fact, seen significant activity and with current deals being signed for the likes of DAC Beachcroft, Deutsche Bank, and DWF - totalling approximately 200,000 sq ft - 2013 could well prove to be a resurgent year for the Birmingham market,” said Ian.
Although take-up in Q1 reached just 113,326 sq ft, this was in fact a 107% improvement on Q1 2012. Levels have not surpassed this since Q1 2010.
Disappointingly, no deals above 12,000 sq ft were seen in the city centre, which resulted in a low average deal size of just 3,778 sq ft.
Volume of large requirements soon to be fulfilled
He added: “On the face of it, the statistics indicate another tough year ahead. What they do not show, however, is the volume of larger requirements that are soon to be fulfilled.
“With continued strong demand driven by lease activities, grade A supply - which now stands at less than two years take up - will continue to erode resulting in a hardening of the incentive packages which occupiers have enjoyed over recent years.”
The growing case for conversion of obsolete stock
In addition, the impact of the Energy Act and legislation has highlighted that around 4 million sq ft of Birmingham's 18.45 million sq ft of office stock could be deemed obsolete and is unlikely to be occupied as office space again. Approximately 50% of this could be potentially converted for alternative use, subject to location, scale and value.
“While many developers have already taken advantage of obsolete buildings through conversion to hotel use, this has fast becoming a saturated market.
“Demand for free schools continue apace, but with the UK's housing shortage and the Government's recent relaxation of the planning laws, we may see more conversions to residential use.
“With existing property values around £30 - £50 per sq ft, and conversion costs in the region of £70 - £100 per sq ft, there is potential to add significant value. However, having strong market knowledge will be key to identifying and unlocking these opportunities,” added Ian.