Resilient demand for prime core offices in Birmingham – Savills
While take-up of office space in Birmingham was subdued in the first half of 2012, demand for offices in the prime core was more resilient, says Savills. Take-up for the whole of Birmingham was down 56% year-on-year at 112,346 sq ft during H1 2012 (deals over 3,000 sq ft), but in the prime core it was only 8% lower at 53,800 sq ft, highlighting a flight to quality among occupiers, the firm notes. Take-up of Grade A office space was down 19% y/y.
Public-sector cuts have had a strong effect in Birmingham, Savills says, but the firm cites forecasts of 2.9% growth in office-based employment in the private sector for the city, which is slightly above the 2.5% rate seen before the 2007 downturn. Savills expects most of this growth to come from existing occupiers. It also notes that Birmingham has a high concentration of large private-sector companies and says this provides reassurance in terms of future demand for offices in the city.
Despite the subdued take-up levels, availability has remained stable at just over 1.6m sq ft as a result of the lack of new development, and the vacancy rate has fallen to 14.3% from 17.6% in 2009. With no new space being delivered, Savills expects top rental levels to remain around the £28.50 per sq ft mark for the rest of this year. It thinks a strong rise in rents is unlikely until 2013-2014, given that economic conditions are likely to remain challenging for the near future.
Savills expects smaller deals to continue to dominate the Birmingham offices market and forecasts full-year take-up of 240,000 – 250,000 sq ft. In the prime core, it expects take-up to be more robust with take-up of around 110,000 sq ft for the year.
