Flight to quality favours prime core Birmingham offices – Savills
There are already around 100,000 sq ft of deals in the pipeline for this quarter within the prime core Birmingham offices market, says Savills, and this could take year-end take-up to 50% above the total seen last year. But year-end total take-up for the wider market for office space in Birmingham is expected to be lower than for 2011.
By the end of Q3, Savills says, take-up in the prime core had reached 132,680 sq ft, which is marginally higher than at the same point in 2011, after strong take-up of 78,800 sq ft in the third quarter. For the wider market the take-up total by the end of Q3 was 40% lower year-on-year. Savills says this highlights the continued flight to quality, and it expects this trend to continue.
An increasing number of larger office deals in Birmingham has helped to boost the take-up figures, with two deals during Q3 for more than 15,000 sq ft and four for more than 10,000 sq ft. The firm says this indicates improving confidence among Professional and Business & Consumer Services occupiers.
While demand improved in Q3, supply of offices in Birmingham also increased, with the vacancy rate edging up to 14.5% and supply rising to 1.66m sq ft. This partly reflects the movement of Five Brindleyplace from the development pipeline into the supply schedule, Savills notes.
Savills thinks a return to Grade A average rental growth is possible, together with continued growth in top rents, as occupier demand tentatively returns and given that the development pipeline for the next two years is non-existent. The top achieved rent for office space in Birmingham so far this year remains £29 per sq ft but average Grade A rents have softened so far this year, down 9.4% year-on-year to £21.36 per sq ft.
