The moribund M42 office market has woken with a jolt, according to experts at the Birmingham office of CBRE.
Take-up and investment activity along the M42 Corridor – particularly in the Solihull area between junctions 4 and 6 – has picked up dramatically in the second quarter of this year.
More than twenty deals were completed from March – June. Total take-up during the period was 134,933 sq ft, in lot sizes averaging 6,133 sq ft, representing a higher figure over the same period compared to Birmingham city centre.
Take-up in the first quarter of 2014 was 75,000 sq ft. The total for the first half of the year, 209,933 sq ft, is already close to smashing the full year 2013 take-up of 224,395 sq ft.
Arguably, the biggest winner has been Fore Business Park in Solihull, with lettings to eTech and UTC Aerospace systems totaling 36,984 sq ft in 2014.
Fore Business Park sits within a 17-acre site adjacent to J4 M42, the second phase of which comprises a further 110,000 sq ft of consented development and is set to change hands. IM Group has exchanged contracts to buy the development from BAM Properties for a reported £20.5million.
There are now only a handful of significant larger office opportunities available. These include 32,692 sq ft at Compton House, Birmingham Business Park; Eagle 2, close to Birmingham Airport, comprising a single floor plate of 21,000 sq ft, and Trinity One, totaling 53167 sq ft at Trinity Park.
Will Ventham, a director in the office agency team at the Birmingham office of CBRE, believes UK Central (previously known as the M42 Economic Gateway), incorporating the Birmingham Airport runway extension and a proposed High Speed Rail Station, has helped stimulate confidence along the M42 among existing and inward investors and that rental growth will follow.
He said: “Stock is now running short as a result of increased take-up and the lack of development over the last five years. As a result, the dynamic is now shifting in favour of landlords, with headline rents returning to historic levels of £21.00 per sq ft.
“The M42 office market shares many similarities to that of Birmingham city centre, We are experiencing a notable improvement in occupier confidence and a growing appetite among corporates to investigate the opportunities resulting from the significant investment into infrastructure in each location. The supply versus demand dynamic in each location is underpinned by a shortage of development pipeline and a reduction in the availability of larger scale opportunities. With expectations for a significant uplift in city centre take up in the second half of the year also, these are exciting times for the Midlands.”
Ed Gamble, senior director in the capital markets team, added that as a result, there is now the prospect of new development, some of it funded speculatively.
He said: “There has been a dramatic turnaround in the fortunes of the out-of-town market in the last three months. It is now back on investors’ radars.”
Canmoor purchased Birmingham Business Park last year, kick-starting the trend, while Allianz acquired Fujitsu’s building on the same estate in a £17.6 million sale and leaseback deal at the start of 2014.
CBRE advised on the latest deal, BAM Properties’ sale of Fore to IM Group.
Mr Gamble said: “Fore supplements IM’s Solihull Business Park holding, giving this acquisitive local investor a significant portfolio along the M42.”
