Market snapshot

Office Market Pulse Birmingham Q4 2013

The Birmingham office market saw a strong end to 2013 with 150,000 sq ft transacted in Q4. With continued absorption of grade A stock and robust occupier demand, will 2014 be the year we finally see a return to speculative development?

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:

2013 review: leasing activity 30% up on previous year

  • The Birmingham office market saw take-up return to the five-year average following a strong end to the year, with the 150,000 sq ft transacted in Q4 resulting in a total annual take-up of 664,147 sq ft. This was a very positive result considering the 60,000 sq ft letting to DAC Beachcroft did not go ahead at 2 Colmore Square.
  • Deutsche Bank's acquisition of 5 Brindleyplace (134,000 sq ft) is evidence that Birmingham can attract significant occupiers that were once the preserve of London and the South East. This inward investment will no doubt serve as a catalyst to other occupiers looking to capitalise on the savings available with such a move.
  • Other large deals that boosted the take-up for the year include: Legal & General (33,500 sq ft) and Housing 21 (25,000 sq ft), although the average deal size remains around the 5,000 sq ft mark.
  • With take-up stabilising, continued absorption of grade A stock and a lack of development pipeline, there is a real opportunity for landlords to refurbish existing city centre stock to cater for what is clearly robust occupier demand.

For an annual comparison of take-up click here.

Significant occupational transactions Q4 2013

Property Size (sq ft) Landlord (s) Tenant / Purchaser Lease
information
Centre City 35,500 Bruntwood Legal & General Confidential
Tricorn House 25,000 CEG    Housing 21  15 year lease, 10 year break option
£12.50 per sq ft
2 Colmore Square  14,000  Nurton Developments  Vax 10 year lease
£23.50 per sq ft
45 Church Street  10,500  Standard Life  JLT  10 year lease
£26.00 per sq ft 

Grade A stock performing well, but what about the rest?

  • The opportunity to refurbish has increased with the introduction of Permitted Development Rights - enabling developers to avoid potentially costly planning applications. This saving of time and money can be the difference in a scheme’s viability.
  • 2013 saw a number of obsolete office buildings converted to hotels, but as that demand for rooms has been satisfied, it appears that the Private Rented Sector will fuel the next phase of conversions.
  • A reduction in the level of office stock across all grades is positive for the market as occupier demand that can’t be satisfied will ultimately result in sufficient confidence to warrant a return to speculative development.

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

Commercial property investment emerges from recession

Our Q4 UK Investment Transactions report reveals that the UK commercial property sector had a stellar end to 2013, with investment at levels that we haven’t seen since before the global financial crisis. The quarterly investment figure of £17.01bn and the 2013 annual investment total of £44.94bn are both the highest the market has seen since 2007.

Importantly, the regional markets also saw a strong finish to 2013 with investment volumes rising by 80% in the second half of the year, in comparison with the first, to drive an overall annual increase of 61%.

The West Midlands region saw investment volumes increase significantly from £1.09bn in 2012 to £1.54bn in 2013. Notable transactions include:

  • One Snowhill Birmingham to Union Investment Management for £125m
  • Mell Square Solihull to IM Properties for circa £46m

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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