Market snapshot

Office Market Pulse Birmingham Q2 2014

Q2 saw improved take-up compared to Q1 and with some larger deals in the pipeline as we head into Q3, the Birmingham office market looks set to rebound during the second half of the year.

You can download a PDF version of this Birmingham Office Market Pulse, or to read and sign-up to receive Office Market Pulses from other UK centres, click here.

In this issue:

Increase in take-up for Birmingham office market

  • In line with our predicted improvement in market conditions, Q2 saw an 11% increase on Q1 city centre office take-up with 113,741 sq ft let, compared to 102,353 sq ft in Q1.
  • There were 20% more deals transacted (35) compared to Q1 (29). The largest letting was 27,506 sq ft at the NTI Building in Bartholomew Row to Birmingham City University. Other transactions of note include 13,500 sq ft at 55 Temple Row for CBRE and the letting of 10,086 sq ft to URS at Victoria Square House.
  • As we saw in Q1, secondary stock continues to dominate the market with grade A buildings accounting for just 26% of deals in Q2.
  • Professional services and the financial sector account for more than half of deals done this year, although interestingly, we have seen increased activity in the recruitment sector – a positive indicator of an improving market.

For an annual comparison of take-up click here.

Significant occupational transactions Q2 2014

Property Size (sq ft) Landlord (s) Tenant / Purchaser Lease
information
NTI Building 27,506 Skills & Funding Agency Birmingham City University Surrender of 7 year lease for a premium
55 Temple Row 13,500 Hermes Real Estate CBRE 10 year lease
Circa £22.00 per sq ft
Victoria Square House  10,086  Ardstone Capital URS 10 year lease, 5 year break option
Rent confidential

Secondary accommodation continues to dominate

  • The acute scarcity of grade A office space continues, with secondary accommodation accounting for 85% of current supply.
  • However, there remain a number of obsolete buildings that could be refurbished to satisfy occupier demand.
  • As choice becomes increasingly limited for occupiers, we expect landlords to reduce incentive packages and hold out for stronger headline rents.
  • Despite market expectation that the opportunity presented by the changes to permitted development rights (PDR) would encourage office-to-residential conversions, we have actually seen very few in the centre of Birmingham.
  • Those conversions will now be even less likely given the growing confidence in the office sector and the fact that the PDR window will close in May 2016.

For a breakdown of current supply by grade, click here.

Commercial property builds momentum

Investment in the UK commercial property sector totalled £11.9bn during the second quarter of 2014 - a 10% increase on the first quarter of the year and 45% higher than in the corresponding period last year.

Investment in the regions has mirrored this trend, with a 39% increase in regional UK offices investment in Q2 compared with Q1. This increase in spending has been predominately led by UK institutional investors as the lack of prime office stock and increasing occupier confidence is continuing to put downward pressure on prime office yields.

The limited availability of prime investment stock but also confidence in the resurgent regional office market is no better highlighted than IM Properties’ recent purchase of 55 Colmore Row for circa £33m; a refurbishment opportunity located at a premier Birmingham address.

Notable transactions include:

  • Priory & Temple Court, Birmingham to Legal & General for £87.5m
  • 5 St Philips Place, Birmingham to Cordea Savills for £38m
  • 55 Colmore Row, Birmingham to IM Properties for £33m

To view our latest UK Investment Transactions (UKIT) report, please click here.

Want more information about this Snapshot?

Alex Tross

0121 237 2307

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Alex Tross
Director - Head of Office Agency - Birmingham.

0121 237 2307

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