HS2 and Metro boost for office letting market

BIRMINGHAM’S office market is likely to see increased preletting activity in 2018, according to new predictions.

The spike in activity will be driven by an ever-decreasing supply which could also see prime grade A rents reach £34 per sq ft within the next 12 months and potentially £35 per sq ft in 2019.

Property agency Savills said demand from supply chains linked to infrastructure projects, such as the Midlands Metro extension and HS2, and the continued rise of serviced offices were two key themes for 2018.

The consultancy reports that 2017 has been a year of two halves for Birmingham, with the lowest H1 total of recent years at circa 238,000 sq ft.

However, with the H2 total set to reach circa 750,000 sq ft, the city is now on track for a record year.

Prominent leasing deals of 2017 include 240,000 sq ft at Arena Central to HMRC and the Department for Work and Pensions while PwC agreed to take the entirety of One Chamberlain Square at Paradise, having previously signed a lease for four and a half floors.

Ben Thacker, office agency director at Savills, said: “After a slow start to 2017, Birmingham’s office market has demonstrated a year of both depth and diversity from occupiers.

“A key issue now is that no newbuild supply is due for delivery until 2019, when Three Snowhill and Two Chamberlain Square at Paradise will enter the market.

“In the interim, the increasingly limited existing supply will continue to decline and ultimately this will encourage ongoing rental growth.”

The firm also notes that flexible space has become more established as a concept in Birmingham in 2017 with serviced office providers accounting for 12.7 per cent of total office take up in the city in 2017 to date, up from zero transactions in 2016.

Jonathan Ottewell, associate director in the office agency team at Savills, added: “There are still a number of the major serviced office operators not yet present in Birmingham, particularly those providing a coworking environment.

“We think the picture will be completely different this time next year, particularly as the city is an obvious choice for those potentially reaching saturation point in London.

“However, if more occupiers seeking sub-5,000 sq ft space focus on flexible offices, this will present challenges for the traditional leasing market at the smaller end.

“Landlords will need to evolve and adapt to stay relevant.”