Competition for space in the UK’s major cities is becoming intense, with companies keen to expand yet often unable to find suitable premises due to a lack in supply. Fortunately, developers are continuing to channel investment into new builds – something which has had a very beneficial impact upon Birmingham’s office market.
According to the latest Birmingham Office MarketView report by CBRE, the amount of available Grade A space in the city fell by only 205,095 sq ft in the second half of 2014. This was despite the fact that take up reached almost 500,000 sq ft in the same time frame, indicating that the number of new builds in the pipeline are for now managing to cope with the upturn in demand.
The report states that between the beginning of July and the end of December last year, there was 2,157,919 sq ft of stock available when confirmed builds in the construction pipeline were taken into account. While slightly lower than the 2,363,842 sq ft available in the first half, this was still a plentiful amount for businesses to take advantage of and ensured the city’s economy continued to grow.
However, one of the senior directors of CBRE’s national offices team, Ashley Hancox, warned against complacency as two of the new builds – a total of 340,000 sq ft at the Paradise Circus development – will not be available to tenants for some time yet.
He says; “This is the first time in a long time that we have seen a significant amount of new stock added to supply.
“Whilst this is welcome, we can’t get too carried away, as the buildings at Paradise won’t be delivered before 2018, so companies looking to move in the very short term will still be short on choice.”
Mr Hancox may be right to be wary, as companies seeking space of 40,000 sq ft or more are at present struggling to find Grade A stock to meet their requirements. This is further compounded by the fact that many firms will be unwilling to locate to buildings with competitors already in residence, making several prime city centre builds all but obsolete.
Furthermore, as average yearly take up now totals 640,000 sq ft, should no new builds be entered into the pipeline Birmingham’s supply is set to run out within the next three years. This timeframe can be further reduced when the quality or location of existing stock is taken into account, as it is entirely feasible that stock which lies outside of the city centre or has not benefited from an upgrade in recent years may never come back into commercial use.
Mr Hancox concludes; “I fully anticipate that demand will continue to pick up as we move further out of recession.
“The prospect of rising demand, coupled with improving rents, will hopefully entice speculative developers out of the closet.
“Some need a pre-let to release development funding, but I hope that now funders can see the market improving that they will start to consider speculative building.”
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