Despite a slower Q3, 2019 is expected to record strong take-up figures well in excess of the 10 year average.
Despite the on-off plans for the UK to leave the EU, research from Colliers International has demonstrated that businesses are still committed to operating in the Midlands.
The latest Q3 offices research recognises that while there has slower growth in the office market in the last three months, the forecast indicates that take up in Birmingham’s City Centre will outperform last year’s results and exceed the 10-year average for the region.
Some 35 deals completed in the third quarter of the year, with 160,593 sq ft secured. Although one Grade A deal dominated the quarter taking 110,000 sq ft, there were also 20 deals in the Digbeth area totalling 18,479 sq ft.
Richard Williams, Associate Director at Colliers International, said: “Despite the continued political turbulence, which has undoubtedly caused a hesitance amongst commercial occupiers generally, the same can’t be said for Birmingham’s SME and fledgling business community. The city is building a fantastic reputation for nurturing new start-ups and Oval Real Estate’s Custard Factory in Digbeth is a prime example of this having carved out an identity as a real hot-bed for young creatives.”
James Craig, Founder of Oval Real Estate, added: “We are delighted to see an increase in occupancy with some fantastic new occupiers joining the Digbeth Estate from some of the more typical workspace locations; the Estate continues to improve and we will be bringing four new fully refurbished buildings on line in 2020.”
The remaining city centre Grade A supply is only 450,906 sq ft. In the CBD area it stands at just 294,224 sq ft available, with a Prime Grade A vacancy rate of 3.97%. However, there are several new Grade A developments and refurbishments under construction totalling 1,350,000 sq ft. In the next three months the largest speculative development 3 Snow Hill (420,000 sq ft) is due to complete.
Prime rents in the city centre remained at £34.00 per sq ft. We anticipate headline rents to continue upwards over the next two years and forecast to reach, if not exceed £36.50 per sq ft by 2021. During the last three months investment volumes saw £103 million transacted over six deals. Prime yields have remained at 4.75% and are expected to remain static as investors continue to seek opportunities in the regions.
Quarter three saw the highest take-up levels for the M42 area this year, with transactions totalling 130,000 sq ft in seven deals. Year-to-date leasing totalled 306,367 sq ft, which is the highest transactional total since Q1-Q3 2015 (365,769 sq ft). Prime rents remained at £25.00 per sq ft and are expected to increase as supply levels decrease with only 339,140 sq ft available, a 4.01% overall vacancy rate.
Leasing activity was dominated by one deal at Blythe Business Park, where ZF purchased a 90,000 sq ft plot to develop a purpose-built technical centre and office building for their regional HQ.
Douglas Bonham, head of the Birmingham National Offices team, added: “Demand for space in the M42 office area is sustaining despite availability dwindling, prompting rental values to rise steadily since 2015 for both prime and secondary office space. In the last quarter we’ve seen property, retail, leisure, media and tech firms investing in the M42 area.”
Lisa Dean, Associate Director for research and forecasting, added: “Interest in offices within the regions is remaining robust despite political uncertainties over our membership of the EU over the last 12-36 months. Pre-let activity remains strong and as such we expect the end of the year and start of 2020 to continue posting healthy levels of take-up.”