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Philippa Pickavance, Head of Agency at Deloitte Real Estate in Birmingham, takes a look at the first quarter’s office take-up figures in Birmingham city centre

wantspacegotspace.co.uk - Philippa Pickavance, Head of Agency at Deloitte Real Estate in Birmingham, takes a look at the first quarter’s office take-up figures in Birmingham city centrePhilippa Pickavance, Head of Agency at Deloitte Real Estate in Birmingham, takes a look at the first quarter’s office take-up figures in Birmingham city centre and the M42 out-of-town market, and reflects upon the investment market predictions for the region:

“The first quarter’s take-up figures in both in town and out-of-town markets still make a lacklustre read for landlords, with only 113,326 sq ft in 30 deals taking place in central Birmingham and 94,827 sq ft in 18 deals in the M42 / south Birmingham market. However, the city centre figure was considerably better as a like-for-like quarter over the same period last year, with a 46.8% increase. The M42 figures were down, representing only 66% of like-for-like figures compared to Q1 2012.

“It is too early to predict how the market will pan out over the rest of the year, but with some larger requirements actively looking for space now, both in town and out, we would hope to see figures improve. For example Deutsche Bank much  awaited signing at 5 Brindleyplace taking the whole 134,000 sqft will boost figures which to date have seen relatively small transactions. The largest in-town deal so far this year was Marsh taking 11,455 sq ft at Colmore Plaza at a headline rent of 27.50 per sq ft, whilst out-of-town Selco Builders Warehouse took 16,300 sq ft, in part, of Boundary House, Wythall Green.

“Deloitte Real Estate’s recent Key Cities report, which looked at market conditions and future changes in key cities across the UK, suggests that occupational demand for offices will be mainly from the professional and administrative sectors, with active demand from the legal sectors in the regions. Rental growth is not expected in Birmingham and incentive expectations remaining static. There is unlikely to be any pre-letting activity in Birmingham either, as there is currently two and a half years of Grade A space available.

“The report also expects Birmingham will continue to see change of use from offices to hotels, educational/training and residential use. This is exampled by Deloitte Real Estate’s recent sale on The Beneficial Building in Birmingham; a mixed use, but mainly empty office building having recently obtained planning for a new hotel, thus seeing 45,000 sq ft of office space lost to alternative use.

“On a more positive note, the report notes that investors in the commercial office market are increasingly being drawn towards the UK regions as a focus for seeking higher returns. Many regional cities are being bolstered by factors such as improved connectivity through large planned infrastructure projects, as exampled by the redevelopment of New Street station in Birmingham, devolution of power, and investment into the retail and leisure markets.
 
“However, UK institutions were the prime purchasers of office space in Birmingham last year, representing almost 40 per cent of the market, followed by property companies at 32 per cent.
 
“Although office rental levels are unlikely to increase, what is promising is that Birmingham is the key city, outside of London, where companies are investing. The figures back this up, showing that £186m was transacted in Birmingham – higher than any other regional city in 2012.

“The Birmingham figures were bolstered at the end of the year, where 40% of the investment deals came good, made up by The Cube sale to European investors Tristan Capital Partners for £37m and Baskerville House purchased by Hermes for £40m. Importantly, there are strong signals that there will be further investor interest in the regional office markets this year, with both domestic and overseas investors looking outside London for their returns.”

Posted by The Editor (wantspacegotspace) on 27th April 2013 (updated 10/05/2013)

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