Birmingham’s office market conditions are improving significantly with take-up in the first three quarters of 2013 surpassing the figures for the whole of the previous year.
Ian Leather, Regional Director in Office Agency at LSH, said that the city’s office market had recorded another strong quarter with continued appetite from institutional investors for properties in the region.
There is also strong interest in converting obsolete offices into student accommodation and alternative uses which has taken some older stock from the supply chain.
The LSH Birmingham Office Market Pulse Q3 2013 report said take-up reached 177,282 sq ft during the quarter.
Year-to-date take-up surpasses 2012
Ian said: “Take-up this year to date has already surpassed 2012’s full year total and we expect total take-up for 2013 to return to the long-term average.
“Serviced office provider i2 has taken 24,000 sq ft at Two Snowhill, extending its city centre presence and taking further advantage of the flexible serviced office market. In addition, German insurance group Allianz has taken 15,000 sq ft at Colmore Plaza, adding to the list of international companies choosing to locate in Birmingham city centre.”
Obsolete office stock feeds demand for student housing
He added: “With approximately 4 million sq ft of obsolete office stock in the market, we are seeing increasing interest from investors and developers looking to convert obsolete office space into residential and student accommodation, taking advantage of low capital values and relaxed planning laws.
“Following the recent growth of student numbers in Birmingham, demand for student housing has rapidly exceeded supply which has led to the current shortage in the city. An example of this was the 130,000 sq ft acquisition of 1 Hagley Road by Seven Capital. This Edgbaston office building was acquired in Q3 for the purpose of conversion to residential/student accommodation.for investment in the regions.
Growing appetite for investment in the regions
“There is continued appetite from investors for regional offices given the more favourable yield profile compared with the London office market. The latest example being the £40m sale of Victoria Square which is rumoured to be under offer to Irish investors.
With signs of a recovering occupational market, investment demand is expected to strengthen further as over £200m of opportunities circulate the market.
“The next 12 to 24 months will be prime time to invest in good quality, well located buildings. Market dynamics are very compelling with the impending imbalance of grade A supply, and the substantial inward investment into the city, such as the new Library of Birmingham and the redevelopment of New Street Station and the Birmingham City Centre Extension to the Midland Metro tram service.”
Recent investment transactions include:
• One Brindley Place, Birmingham - £30.00million (6.3%)
• 84 Colmore Row, Birmingham - £11.00m (5.8%)
• Tungsten Building, Blythe Valley - £6.26m (6.94%)