Market Watch
Birmingham Office Market

Birmingham Office Market
Birmingham Office Market

26 February 2018, words by Mike Barnes

Birmingham city centre office market take-up exceeds one million sq ft in 2017

Market Snapshot

■ Birmingham city centre take up reached 1,005,000 sq ft during 2017, 51% above the 10-year average of 666,000 sq ft which marked a record year. The final quarter of take-up in 2017 reached 354,000 sq ft in the city centre (see Graph 1).



Take-up by quarter

Graph 1

Source: Savills Research

■ The largest deal in Q4 was Regus signing for 76,000 sq ft at refurbished The Crossway, Great Charles Street (see Table 1). Regus also signed for 33,000 sq ft at The Lewis Building during the final quarter.


Significant Deals in Q4 2017

Table 1

Source: Savills Research

■ Driven by the Government Property Unit (GPU) deal, public services accounted for 27% of take-up in the city centre last year, including the 237,000 sq ft pre-let at Arena Central.

■ Take-up from serviced office providers reached 208,000 sq ft during 2017, the highest level on record and this accounted for 21% of the total take-up, more than any other regional city.

■ There remains a shortage of Prime Grade A space in Birmingham city centre following a number of large lettings. Prime Grade A space now stands at only 169,000 sq ft, enough for only six months of take-up at average levels (see Graph 2).



Graph 2

Source: Savills Research

■ Top rents in Birmingham city centre now stand at £33 per sq ft for the best space. This represents a 1.5% increase during 2017 (see Graph 3).


Top rents

Graph 3

Source: Savills Research

■ With sustained office demand, we expect take-up to reach 825,000 sq ft in the city centre during 2018. We forecast top rents to reach £34 per sq ft by end 2018.

■ Whilst Three Snowhill and Two Chamberlain Square are under construction, there is no space set to complete until Q2 2019.

■ Three Snowhill will deliver 420,000 sq ft of much needed Grade A office space on its completion during Q2 2019. Until then, competition among occupiers will further intensify for Grade A space.

■ Office investment in Birmingham reached £462 million during 2017, 16% above the previous 10-year annual average (see Graph 4).


Office investment by quarter

Graph 4

Source: Savills Research, Property Data

■ Overseas investment acquired £288 million and accounted for 62% of the total investment last year. This was largely driven by the £265 million acquisition of 3,4,5,6 & 9 Brindleyplace during the first quarter.

■ Only £17 million of office transactions took place across three buildings during the final quarter of 2017.

■ Prime office yields remain at 4.75%, in line with the prime regional average. In an income driven environment, prime yields remain attractive against West End (3.25%) and City offices (4%).

■ We expect yields to hold firm throughout the first half of 2018 as overseas investors become increasingly open to looking outside London to the regional cities.


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Key contacts

Mike Barnes

Mike Barnes

Research Analyst
Commercial Research

Margaret Street

+44(0) 203 107 5459