Birmingham offices market showing positive signs22nd October 2012

Birmingham’s all-important commercial offices market has seen some light at the end of the recessionary tunnel in the third quarter of 2012, after a disastrous start to the year.

That is the key conclusion emerging from a new survey into the state of Britain’s regional offices market, by global real estate services firm Cushman & Wakefield.

The survey has analysed take-up, supply and demand, and rental levels during the first nine months of the year, and has found that the third quarter return was far more encouraging than the first half of the year.

In the last quarter, some 171,000 sq ft of office space has been taken-up. In the preceding six months, only 93,081sq ft of space was taken-up in the central office market, the poorest six-month return in a decade.

In addition to the space taken-up in the last quarter, a further 195,000 sq ft of space, three poor quality buildings are to be converted into other non-offices uses, permanently removing them from the available stock of offices in the city.

The three are Tame House, which has been bought by the Free School Trust, and the Exchange buildings and Martineau Place, both of which are to be converted into hotels.

Scott Rutherford, who heads the offices team at Cushman & Wakefield in Birmingham, said: “The third quarter figures were good already, but losing these three buildings out of the supply figures is helpful to the market.

“In addition, vacancy rates are not as bad as they were, and it now seems as if the market is pulling through.

“There remains quiet optimism in the market that this quarter three return is a positive sign of things to come, with probably one or two substantial transactions on the horizon in the final quarter.”

These potential transactions could include moves by Legal & General and Shoosmiths to seal deals to take more space in the city.

Shoosmiths, which currently has 27,000 sq ft of offices, is believed to want to double of space it occupies.

Despite this, Mr Rutherford warned that demand at the larger end of the market remained thin, and although the central office market continued to be over supplied, grade ‘A’ space was continuing to decrease.

He added that as the development pipeline was very tight, due to funding for new developments drying up because of the credit crunch, there would be a limited choice going forward for top end occupiers.

Only two significant buildings are under construction/refurbishment in the city centre – Two Snowhill (120,000 sq ft) and 5 Brindleyplace (136,000 sq ft).

In the out-of-town market, the Cushman & Wakefield survey found that there has been more activity in 2012 than at any time in the past years.

In the first half of the year, out-of-town take-up was significantly greater than the city centre for the first time in ten years, driven by the automotive and technology, media and telecommunications (TMT) sectors.

Mr Rutherford said: “While we feel that the out-of-town market take up will be less spectacular during the second half of 2012, the market will be talking about this year’s return for many years to come.”

Pictured: Scott Rutherford