5 months ago
Birmingham has long been one of the UK’s economic powerhouses but, with much of the country, it has been left behind by the South East. A recent uptick in office leases demonstrates the second city’s progress in the business world.
According to CBRE's latest UK Office Market Report, Birmingham recorded the highest office take-up outside London and the South-East during the second quarter of 2023. Let's dive into the details of this impressive transformation and explore why Birmingham is becoming an increasingly attractive destination for businesses.
In Q2 2023, Birmingham saw a surge in office take-up, with landlords leasing 174,907 square feet of space – an impressive 15% jump from Q1 2023. Businesses took up a total of 327,000 square feet in the first half of this year, marking a 12% growth compared to H1 in 2022.
These new stats represent the most significant take-up of property since 2020, highlighting the Midlands city’s resilience in challenging economic conditions.
Three of the five biggest office deals in the country during this period were in Birmingham. These included a 36,000 square feet lease at Louisa Ryland House, 22,900 square feet at Crossway House, and 21,500 square feet at 54 Hagley Road. These sizeable deals have put Birmingham on the map as a key player in the current UK office market.
While nationally, 37% of office take-up is attributable to businesses in the banking, finance, and business services sectors, Birmingham's success has been more diverse.
Notable tenants in the ‘city of a thousand trades’ included an influx of education providers like RE-defined, Arden University, Global Banking School and QA Higher Education. The versatility of Birmingham’s buildings and areas appears to be a key factor in its attractiveness to a broad range of businesses.
Despite the impressive take-up, Birmingham's office availability only saw a 1% increase, leaving just over 2.5 million square feet available.
Theo Holmes, Senior Director at CBRE in Birmingham, said: “Businesses looking to move have a limited selection to choose from, be it prime second hand or new ground-up space.
“Whilst the recent commencement of new speculative development at 3 Chamberlain Square, Paradise, by Federated Hermes/MEPC will deliver 189,000 sq ft of much needed ‘world class’ office space into the market in Q1 2025, we expect activity in 2024 to be predominantly driven by wholescale back to frame redevelopments. 19 Cornwall Street and 5 St Philips are the standout schemes currently under construction – collectively comprising circa 215,000,000 sq ft – so a supply squeeze is anticipated if take-up continues its current trajectory.
“There are a handful of realistic development opportunities, including the House of Fraser, Smithfield and Martineau Galleries sites but these are potentially longer-term plays. Birmingham desperately needs to expand outside its traditional core business district. The magnetism of HS2 we expect will encourage this. In comparison to other regional cities, Birmingham remains great value for occupiers and inward investors.”
The growth of the second city's office market isn't without challenges. High interest rates, construction cost inflation, and a shortage of brownfield sites are barriers to the new development needed to meet the increasing demand.
Birmingham is optimistic about its future, with the introduction of HS2, a high-speed rail project set to connect Birmingham to London and the North. This immense and long-anticipated development should quickly fuel the city's economic growth.
Birmingham's prime rents have risen beyond 41 per square foot, reflecting the high demand for good quality office space. Still, compared to its neighbouring cities in the Midlands, it retains its value.
Prime rents in Bristol, Manchester and Edinburgh have already exceeded Birmingham's levels. London's West End is in a league of its own, with prime spots costing businesses an eye-watering £140 per square foot.
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