Who's occupying the market?
- Birmingham has recorded 40,398 sq ft of take up across 8 deals with the most significant transactions occurring at St Philips Point and 4 St Philips Place.
- Headline rents have remain largely unaffected.
- Incentives are more generous to facilitate transactions.
4 St Philips Place
The Calm before the Storm
“Despite the Covid-19 pandemic, the favourable landlord market dynamics in the Birmingham city centre office market remain with demand continuing to outweigh supply.”
Many occupiers are waiting for a route out of the pandemic ahead of signing for new office accommodation. This has provided them with the opportunity to fully understand the impact of the pandemic on their businesses, whilst also assessing how much space they require and how they would use this space going forward.
Although several occupiers have transacted in 2020, this has been largely due to external or regulatory forces, whilst the vast majority of occupiers have looked to monitor the situation until life and with it the economy return to normal.
Many businesses have fared better than they initially feared in 2020 and today we not only have a route out of the pandemic but also a bilateral agreement with Europe providing further stability. As a result, Birmingham city centre has seen an increase in the number of requirements searching for space. Whilst on the supply side, there has not been any New Grade A space delivered to the market since Three Snowhill and Two Chamberlain Square in Q1 2020, and with no new Grade A space to be delivered until 103 Colmore Row in Q3 2021. With a return to normality several months ahead of this, we expect occupiers to move swiftly in order to secure their preferred building.
- Atkins: With their existing landlord looking to redevelop their current building, they have been seriously looking at alternatives for the last 18 months. Initially they were searching for 60,000 sq ft however this has now been revised to 40,000 sq ft. They have shortlisted Two Chamberlain Square and Three Snowhill.
- Browne Jacobson: Were initially in the market for 15 – 20,000 sq ft. However as a result of the pandemic, they agreed a short term extension at Victoria Square House and have now recirculated their requirement for 12,000 sq ft and are looking to secure space early in 2021.
- Tilney/ Smith Williamson: The merger discussions between these two businesses has been on-going for several months. The pandemic bought them time to reassess their requirements and they have revised the size of this requirement, whilst having time to work through the finer detail and complete the merger of the two businesses. Their advisers are due to issue RFI’s shortly and recommence their search for new office accommodation within the city to bring both businesses together.
- GPA: Initially came to the market for a new government hub in Birmingham city centre towards the end of 2019 looking for 200,000 sq ft. The size of this requirement has been revised down to 160,000 sq ft due to a department no longer being included within this hub and not because of changing working practises created by the pandemic. They have now started to request RFI/ RFP’s and have shortlisted 10 Brindleyplace, Arena Central, New Garden Square & The Post and Mail Building for this new hub.
55,000 Shades of Grey
We are still yet to see ‘grey’ space come back to the market in Birmingham city centre, as we expect occupiers to wait for a period of reoccupation ahead of assessing if they need as much space as they did before the pandemic. Whilst many businesses have fared much better than they could have envisaged going into the pandemic, with many sustaining their earnings over the last 9 months.
- Deutche Bank: The German bank has been looking to sublet 30,000 sq ft of the 135,000 sq ft they occupy at 5 Brindleyplace since February 2019. This space was presented to the market before the pandemic started to take hold as part of their cost cutting strategy.
- Amey: They have brought one of the two floors they occupy at The Colmore Building back to the market. This is because of a contract that they lost with Birmingham City Council rather than as a result of Covid-19.
- Freightliner: Have released 4,500 sq ft of the 16,000 sq ft they occupy at The Lewis Building. This is as a result of Brexit and freight volumes rather than Covid-19.
Pre-Letting Activity in Development Pipeline
KF Office Agency Comment
Although take-up figures for Q4 were subdued, the news of successful vaccines during the quarter provided the city’s office market with a much needed boost. With occupiers seeing a clear path out of the current restrictions, as well as a favourable bilateral agreement with our European neighbours. Resolving both issues has provided occupiers with the certainty to plan for their post pandemic futures. This in turn resulted in an uptick in new enquiries as well as those occupiers previously looking for office accommodation recommencing their searches. We therefore envisage that take-up in the city will improve considerably from the second half of 2021 with an effective vaccine roll out, with those occupiers who move quickly being able to secure the best accommodation in a market where demand still outstrips supply.
There are currently 859,000 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
IWG 57,000 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 130,000 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 and IWG are under offer on 57,000 sq ft at The Mailbox.
Grade A office supply has increased slightly from the previous quarter to 469,994 sq ft following AXA re-gearing their lease at St Philips Point whilst reducing the amount of space that they occupy. No new build Grade A supply has been delivered to the market this quarter.
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 (Q4 2020 vs Q4 2019
Active Requirements (10,000 sq ft +) Vs Grade A Availability (10,000 sq ft +)
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