Lack of supply is taking its toll on the M42 and Solihull office market, following a lacklustre quarter of deals, according to Solihull and Birmingham-based independent commercial property agency KWB.
Office take-up in the M42 and Solihull office market in the second quarter (April to June) of 2018 was 55,287 sq ft across 14 office space transactions. With 91,000 sq ft of space transacted in the first three months, halfway through 2018 total take-up is only 44% of the average annual total.
“The amount of space available in the M42 and Solihull office market, particularly for larger occupiers, is being eroded each quarter, and it is really struggling to meet demand,” says Malcolm Jones, a senior member of KWB’s Office Agency Team, writing in KWB’s Q2 2018 M42 and Solihull Office Market Report.
The largest deal of the quarter, which saw CSI taking 15,965 sq ft of space at 2940 Trident Court on Birmingham Business Park, effectively removed twice as much space from the market, as its existing Coleshill office space is earmarked for demolition to make way for HS2 rail infrastructure.
With so few options for occupiers to consider in Solihull and the M42 corridor, businesses are deciding to stay put, relocate further down the M42 or M40 towards Warwick, or move into Birmingham.
Mr Jones continues: “The cyclical nature of the office market would indicate that 2019 and 2020 should be bumper years, with many lease events set to occur five years on from the peaks of 2014 and 2015. How can the M42 and Solihull office market find a solution to this expected increase in demand, at a time when it is already struggling to meet current requirements?”
According to Mr Jones, the most obvious solution to address the shortage of space is speculative development. He says: “Longer term, the plans for UK Central and Arden Cross will help to address the shortage of space. However, apart from IM Properties’ c.15,000 sq ft office, ‘First’, being speculatively developed on Blythe Valley Business Park, no other developments have moved any further forward than the planning stages.
“Commercial property developers have taken the line that they will only build new offices in Solihull and the M42 corridor in the event of a substantial pre-let, along the terms of a 10 or even 15-year lease. This is at a time when occupiers across the country have never wanted more flexibility, putting the market in somewhat of a stalemate.
“This contrasts substantially to Birmingham city centre, which is currently enjoying its highest ever level of commercial property development, twice that of pre-recession levels.
“The serviced office trend in Birmingham city centre largely continues to evade the surrounding out-of-town office market. The difference in the occupier base between the city and out-of-town is likely to be the reason for this, with businesses not seeking the same level of flexibility as has come to be expected in Birmingham city centre.
“However, could a serviced or managed office operator provide the market with that all-important pre-let commitment to get new office space built? It’s a lateral concept, but the market could certainly do with some lateral thinking to retain and attract occupiers within Solihull and the M42 corridor,” concludes Mr Jones.