The last quarter of 2015 demonstrated a strong end to the year for Birmingham’s city centre and out-of-town markets, according to the latest Big Nine report from Bilfinger GVA.
According to the quarterly report, which analyses regional city-centre and out-of-town office activity, both of Birmingham’s key markets fared well, with lettings comfortably above the five year quarterly average.
National Grid’s 46,000 sq ft letting at Lansdowne Gate marked the largest out-of-town letting, contributing to 102,858 sq ft of activity across the quarter, an 11% increase on the five year quarterly average.
In the city centre market, deals totalling 212,449 sq ft were completed – demonstrating a rise of 20% over the five year average – with UNITE’s 56,000 sq ft transaction at Birmingham Science Park Aston making the largest contribution.
These figures contributed to a record-breaking year for the city centre market, with 970,000 sq ft of deals completed, a significant uplift on the previous high of 886,000 which was recorded in 2008.
Charles Toogood, Senior Director in the Midlands Offices team, said: “With significant deals such as the 45,000 sq ft letting to Advanced Computer Software Group at the Mailbox and continued interest from inward investors like HSBC who have committed to the full 210,000 sq ft at 2 Arena Central, it is little wonder that we have seen such a momentous level of activity.
“Backed by continued capital investment in large-scale infrastructure projects like New Street Station, new build space such as Paradise, and the refurbishment of existing buildings like IM Properties’ 55 Colmore Row, 2 Cornwall Street and the Lewis Building, the city will continue to deliver ensure a supply of high quality office accommodation into the market.”
Nationally, Q4 2015 saw occupier take-up figures in the UK’s major regional city centres come in at 1.67 million sq ft, 38% above the five year average.
Strong take-up figures across all of the ‘big nine’ cities took total activity for 2015 to 9.6 million sq ft, 20% above the five year average, the fourth consecutive annual increase in take-up.
In the out of town markets a total take-up level of 890 000 sq ft in Q4 2015 also pushed up activity levels in this sector to a level in excess of 13% of the five year average; again demonstrating the strong occupier demand levels both in regional city centres and their surrounding areas.
Like Birmingham, take-up in Manchester remained above average across both key markets. Cardiff and Leeds city centres also reported figures significantly above trend levels, whilst Glasgow and Edinburgh reported well above average figures for out-of-town offices.
A number of significant lettings dominated take-up in Q4. The stand out letting took place in Cardiff. BBC Wales secured 150,000 sq ft, following L&G’s £400m backing for the Central Square scheme. This added to Cardiff’s total Q4 figure of 290, 374 sq ft, dwarfing its five year quarterly average of 94,158 sq ft.
In terms of Q4 out-of-town take-up, Edinburgh dominated, reporting 141,389 sq ft, compared with its five year quarterly average of 42,269 sq ft. Major contributors to this total comprised key deals all at Edinburgh Park, including 85,000 sq ft to JP Morgan Chase and 31,000 sq ft to HSBC.
Carl Potter, Senior Director and national head of Offices at Bilfinger GVA, comments: “Regional occupier office take-up activity is reaching a peak. Supply of prime grade A space remains extremely tight across the nine cities with an average just short of a years’ availability based on past take-up rates.”
This supply shortage has resulted in net effective headline rents increasing by 9% during 2015, predominantly due to rent free periods falling by over five months on a ten year term, to 21 months.