Market Watch
Birmingham Office Market

Birmingham Office Market
Birmingham Office Market

13 June 2017, words by Clare Bailey

Brindleyplace acquisition sees first quarter office investment reach £323 million

Market Snapshot

■ Take-up reached 129,520 sq ft in Birmingham city centre during the first quarter of 2017, 3% above the 10-year first quarterly average.

■ The key deal was Arcadis Consulting taking 22,953 sq ft over two floors at Cornerblock, formerly known as Two Cornwall Street, set to complete imminently.

 

GRAPH 1

Take-up by quarter

 
Graph 1

Source: Savills Research

■ The most active business sector during the first quarter was the engineering sector, which accounted for 18% of take-up. We expect a number of engineering firms to remain active over the next two years in the wake of HS2.

■ With a shortage of large deals in the first quarter, 49% of deals were in the sub 10,000 sq ft size band, above the long-term average of 38%.

■ We expect total take-up for the city centre market to reach 750,000 sq ft during 2017, following the large requirement from HMRC.

■ Following the arrival of 55 Colmore Row, total supply saw a 4% increase to 2.6 million sq ft since the end of 2016. 55 Colmore Row currently provides 112,000 sq ft of available space following a comprehensive redevelopment.

■ Prime Grade A availability has increased from 552,000 sq ft to 576,000 sq ft, which is only enough to cater for around 18 months worth of Grade A demand.

GRAPH 2

Availability

 
Graph 2

Source: Savills Research

■ Top rents stand at £32.50 per sq ft, but we expect this to grow beyond the historic headline of £33 per sq ft as prime developments near completion toward the end of 2018.

■ The much anticipated delivery of Three Snowhill (pictured above) will provide further Prime Grade A space on completion in 2019.

GRAPH 3

Top rents

 
Graph 3

Source: Savills Research

■ The first quarter of 2017 saw £323 million of office investment in Birmingham, over three times the 10-year quarterly average.

■ This was largely down to HAIL's (HSBC Alternative Investments) record £265 million acquisition of Brindleyplace, reflecting a yield of 6%.

GRAPH 4

Office investment by quarter

 
Graph 4

Source: Savills Research, Property Data

■ Overseas investors remain the dominant investment type in Birmingham, following Alduwaliya's £22.5 million purchase of 111 Edmund Street. With a weak sterling, regional offices remain attractive to the overseas market.

■ However, the UK institutions have a presence in Birmingham during 2017, following the West Midlands Pension Fund's £26 million purchase of 2 St Phillips Place.

■ Birmingham's prime yields currently stand at 5.25%, in line with the average prime yield across the UK regions. We expect yields to remain stable through 2017, with sustained demand for well let assets.

TABLE 1

Significant Deals in Q1 2017

 
Table 1
 
 

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Key contacts

Clare Bailey

Clare Bailey

Associate Director
Commercial Research

Savills Margaret Street

+44 (0) 20 7409 8863