Who's occupying the market?

  • Birmingham has joined Bristol and Leeds in setting a new headline rent during Q3 2020. This new headline rent is £37.00 psf.
  • Birmingham has recorded 79,953 sq ft of take up across 16 deals with the most significant transactions occurring at Two Chamberlain Square, 1 Colmore Square and Two Snowhill.

Two Schools of Thought

We are seeing a noticeable polarisation of those occupiers who face constraints and are having to transact now, against those that wish to scrutinise their space through reoccupation whilst waiting for the full fallout of this crisis to become clear, before making firm commitments.

  • Knights PLC: Numerous company acquisitions over the last 18 months has resulted in Knights PLC having several offices across the city. Consequently needing to consolidate these offices into one, has resulted in Knights PLC taking 18,000 sq ft at Two Chamberlain Square.
  • Mazars: Mazars have been in the market for a couple of years, and with their lease at 45 Church Street expiring in September, along with a proactive landlord in RLAM, they’re happy to get their floor back to commence the refurbishment and continue with their business plan for the building. Mazars have taken 12,000s sq ft at Two Chamberlain Square.
  • ISIO: The former arm of the KPMG pensions business was required by their regulators to move out of KPMG’s offices by September, therefore being forced to seek alternative accommodation. They have taken 10,000 sq ft at 1 Colmore Square.
  • Carter Jonas: Since their arrival into Birmingham several years ago, Carter Jonas have been in serviced office accommodation whilst they have grown their presence within the city. Having established themselves in Birmingham getting to a critical mass, they have seized the opportunity to acquire Gowling WLG’s surplus space in the same building that they occupied service accommodation within, taking 12,000 sq ft at Two Snowhill.
  • Browne Jacobson: Have agreed a four-year lease extension with a break in 2 years to remain in occupation at Victoria Square House. They will now look to recommence their search from Q1 2021. With their current landlord happy to accept the short-term income, this extension will allow Browne Jacobson further time to assess the amount of space that they require following a period of reoccupation, before deciding on their relocation. A frustrating decision for landlords with space to fill however an understandable and sensible business decision from Browne Jacobson.

Two Chamberlain Square

Two Snowhill

The Space Debate

With the mainstream media frequently debating the need for offices coming out of the pandemic, business of all sizes have looked to review their real estate portfolios as part of cost cutting exercises to survive the oncoming recession and the difficulties this will bring. At present we are seeing occupiers typically reducing their requirements by 10 – 30% as part of this process. A case in point of this is Tilney/ Smith Williamson, who were previously in the market for 18,000 sq ft however following a review of their requirement have revised this down in size to 12,000 sq ft.

UK Regional Cities – Office Take Up Q3 2020

UK Cities start V-shaped recovery

Although take up recorded across the UK regional cities is still considerably down on their five-year averages, there are encouraging signs of activity. Manchester and Leeds recorded much improved take up figures for Q3 against Q2, as momentum started to build in office markets across the country over the quarter.

Lurking in the shadows

At present we are seeing a minimal amount of ‘grey’ space coming back to the market in Birmingham city centre, which is likely to be a result of occupiers utilising all their available space as they look to accommodate their staff at a socially safe distance. We don’t expect to be able to fully assess the amount of tenant space available on the market until the need for social distancing diminishes, and the realities of the oncoming financial difficulties for some businesses starts to hit home. Whilst we have seen WeWork surrender their lease at Louisa Ryland House, this space is still being refurbished and won’t be available until March 2021, which is when we envisage other tenant space coming forward.

Pre-letting Activity in Development Pipeline

KF Office Agency Comment

There are encouraging signs of increasing activity levels in Birmingham city centre, with many businesses now back at their desks, albeit at reduced capacity levels. Although the occupiers transacting during Q3 have had to make decisions due to various constraints, there has been a significant number of occupiers starting to make progress with their requirements, with several RFP’s & RFI’s being issued over the course of the last few weeks.

There are currently 742,000 sq ft of active requirements searching for office accommodation in Birmingham city centre. These include:

GPA 200,000 sq ft

ARUP 60 – 80,000 sq ft

GPA 50,000 sq ft

Hiscox 45,000 sq ft

Atkins 40,000 sq ft

Eversheds Sutherland 40,000 sq ft

Serendipity Labs 35,000 sq ft

Around 100,000 sq ft is currently under offer in the city centre, of which ARUP are rumoured to be under offer on 80,000 sq ft at One Centenary Way.

Grade A office supply has decreased from the previous quarter to 437,337 sq ft following no new supply being delivered to the market and a number of transactions occurring over Q3.

Coming Soon – The next major building to be delivered will be 103 Colmore Row in Q3 2021.

103 Colmore Row Delivering 230,000 sq ft in Q3 2021

10 Brindleyplace Delivering 110,000 sq ft in Q4 2021

One Centenary Way Delivering 280,000 sq ft in Q4 2022

Active Sectors (Q3 2020 vs Q3 2019

Active Requirements (10,000 sq ft +) Vs Grade A Availability (10,000 sq ft +)

Important Notice © Knight Frank LLP 2020 – This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank LLP for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London, W1U 8AN, where you may look at a list of members’ names.