Office take-up along the M42 is outpacing take-up in Birmingham city centre for the first time since official take-up figures were collated in 2005.

In the first half of 2012, 401,691 sq ft of office space was let along the M42 corridor, compared with just 147,654 sq ft in Birmingham’s central office core.

The half-year figures for the M42 have already surpassed 2011’s total take –up of 198,337 sq ft.

According to Douglas Bonham, head of out of town offices at the Birmingham office of Colliers International, the out of town office market is becoming the ‘darling’ rather than the ‘poor relation’ of the region’s office sector.

He said: “There’s no doubt that in recent years the headline grabbing deals have been done in the city centre. However, while the city centre market is now stuttering, out of town take-up is powering ahead.”

And it’s not just the M42 that has seen a surge in activity.

Demand is being fuelled by the private sector. The rising fortunes of Jaguar Land Rover and Rolls Royce have boosted take-up in the Coventry and Warwickshire area, from both the car makers and their supply chain. The Sainsbury deal in Coventry – 130,000 sq ft at Ansty Park  was a relocation out of London and Ericsson also acquired 50,000 sq ft at Pro-Logis Park.

Supply is also beginning to tighten in certain locations, for example along the M5, from Worcester to Walsall, there are just three buildings in excess of 10,000 sq ft remaining. In Bromsgrove, there is nothing over 7,500 sq ft and in Stratford-Upon-Avon just one good quality building of any size is still available.

Mr Bonham said: “What we are now beginning to see is tenants being forced to compromise and look further afield to find the right property, particularly where Grade A accommodation is being sought.”

However, whilst the take-up statistics speak for themselves, experts at Colliers International believe investor perceptions are lagging behind.

David Smeeton, the head of the Birmingham office and national investment team, said: “There is a perception among investors that the occupier appetite for out of town space is limited. As a consequence, out of town office space is not on their shopping lists.

“However, the figures don’t lie. What’s more, with stock being absorbed at this pace, we are heading for a supply shortage, which opens up opportunities for investors.”

The experience of Birmingham Business Park is also giving investors cold feet. More than 350,000 sq ft across circa 30 buildings has languished on the market for several years.

Mr Smeeton said: “Birmingham Business Park has very specific issues. Its ownership is disparate and it’s notoriously lacking in amenities. It is not the yardstick by which the market should be judged.”

However, some investors have got in early and are seeing returns.

Examples include IM Properties’ acquisition of T2 at Trinity Park, close to the airport. The building is let to Logica UK Ltd until December 2018 at a rent of £19.50 per sq ft. It was purchased from Aberdeen for £6.75million, representing a return of 8.9 per cent.
In addition, National Grid acquired the freehold of the 244,192 sq ft building they occupy at Warwick Tech Park for £55million from Prudential.

Mr Smeeton said: “A number of other owner occupiers are looking to buy in their buildings at the moment, but those deals need to happen before we can establish a trend.”