A limited supply of new Grade A office space coupled with an increasing number of active occupier requirements is creating a race for space in Birmingham.
New Grade A office supply in the city centre currently stands at 323,000 sq ft, with a further 424,000 sq ft of good quality secondhand Grade A space supplementing the city’s office stock.
But with some 900,000 sq ft of active requirements in the market, including Goldman Sachs and a number of government hubs, competition for space is intensifying, according to Theo Holmes, senior director and head of office agency at CBRE in Birmingham.
Holmes says the supply and demand imbalance is being caused by a ‘flight to quality’, with companies upgrading their office space post-pandemic. This has also led to a spike in headline rents, with new records in excess of £40 per sq ft established in the city.
“We’re seeing a major shift in the way businesses are operating, with agile and flexible working now being the norm,” says Holmes. “The health and wellbeing of employees, along with sustainability and the environment are also high on the corporate agenda. As a result, companies are reevaluating their office occupational needs and Grade A space is the only option that ticks all the boxes.”
Based on the current take-up rate and the five-year average, he says there is currently less than a year’s supply of Grade A office space in Birmingham.
“Prior to the COVID-19 pandemic, annual take-up of Grade A office space was around 50 per cent of the overall total. Since then, Grade A take-up has increased to between 68-75 per cent.
“The challenge in the short to medium-term is the supply of prime office stock to accommodate both local ‘churn’ and inward investors. One Centenary Way at Paradise represents the only speculative new build office in the central business district under construction and scheduled for completion this year, of which 68,000 sq ft has already been pre-let to Arup.
“Other than Bruntwood SciTech’s 120,000 sq ft Enterprise Wharf building at Birmingham Innovation Campus, which is scheduled to open in Q4 2022, there are no other brand-new office developments under construction or committed in the development pipeline.
“As a result, office supply in the short-term will be largely reliant on ‘back to frame’ redevelopments and high-quality refurbishments in already established locations, such as CBRE IM’s 213,000 sq ft 10 Brindleyplace. The opportunity to leverage embodied carbon on these redevelopments enhances the attractiveness to sustainability focused occupiers.”
Despite the short-term impact of limited Grade A office supply, Holmes assures the city centre remains ‘open for business’, with the next wave of new developments coming down the line, and supported by the region’s increasing attractiveness as a hub location for inward investment. One of the new developments in the pipeline is 3 Chamberlain Square at Paradise, which recently secured planning consent.
But for now, Holmes notes that the competition for space means occupiers need to work harder and more closely with property consultants to identify and unlock opportunities.
“Occupiers looking to move office in the next couple of years need to be quick off the blocks or risk being left behind in the race for the best space.”