The Chamberlain News

It’s boomtime Birmingham as demand for luxury office space rockets

Birmingham’s luxury Grade A office sector is booming at a rate not seen since the late 1980s.

Demand for space is at a 27-year high, pushing up rents and contributing to a temporary shortage of accommodation while new prestige city centre schemes including Paradise Circus, Arena Central, Snow Hill and Southside are coming on stream.

Figures released by DTZ suggest the take-up of office space in Birmingham is at its highest quarterly level since 1987and is running at 35 per cent above the long term average. The impressive performance was helped by HSBC’s decision to relocate its retail bank to Arena Central.

Birmingham’s position as a major regional centre for financial services is likely to receive a further boost when HS2 arrives in 2026, cutting journey times to London dramatically.

DTZ say the city centre office market is being driven by a mixture of inward investment and expansion amongst long-established occupiers.

With eight million square feet of speculative development due to be completed by 2019, investors are queuing up to get a slice of the action. Even so, despite a 138 per cent increase in office development the rate of building is still below the pre-2009 average before the credit crunch and recession took hold.

The trend lends extra credence to city council leader Sir Albert Bore’s long-held insistence that Birmingham must concentrate on city centre wealth creation through office-based development – even though some Labour councillors claim the policy merely creates high-end jobs for commuters coming in to Birmingham and will not ease the city’s chronic unemployment problems.

Rapid growth in demand for office space is the latest piece of evidence to suggest the Greater Birmingham economy is on the move.  Last month it was announced the Greater Birmingham and Solihull LEP area attracted 73 new foreign direct investment projects, nine per cent more than the next highest LEP.

Investors included world-famous brands such as Jaguar Land Rover, KPMG, Virgin Media and Amazon.

Overseas investment was primarily driven by advanced manufacturing, which represented 40 per cent of all projects, followed by business, professional and financial services with a third and IT and digital, with 15 per cent. All three sectors have been heavily targeted as part of the region’s strategy to diversify its economy and create the greatest employment opportunities for the local workforce.

Birmingham is not alone in experiencing a boom in office development. Other major cities outside of London are also reporting growing demand for Grade A office space and a shortage of development opportunities which is said to be critical in some regions.

Large sites in particular are at a premium, forcing firms to move into several smaller premises rather than relocate to one large office, according to DTZ.

Rents are increasing alongside less favourable lease terms and a marked drop in rent free incentives.

DTZ expects rents in Birmingham to increase by 14 per cent to £32.50 per square foot by 2019.