It is safe to say that 2017 was a year of two halves for Birmingham’s office market. After a slow start, with the lowest H1 take-up of recent years, occupier demand went on to demonstrate both depth and diversity. In fact, the H2 take-up total of approximately 750,000 sq ft made 2017 a record year overall.

In 2018, demand from companies in the supply chains linked to infrastructure projects, such as the Midlands Metro extension and HS2, will be a key theme. Likewise, so will be the continued rise of serviced offices. We also expect to see increased pre-letting activity, driven by an ever-decreasing supply. No new build space is due until 2019, when Three Snowhill and 2 Chamberlain Square at Paradise will enter the market. This lack of supply could push prime Grade A rents to £34 per sq ft within the next 12 months and potentially £35 per sq ft in 2019.

Flexible space became more established as a concept in Birmingham last year, for example CEG’s Alpha Works, which went from strength to strength. Serviced office providers accounted for 21 per cent of total take up (207,800 sq ft), compared to no transactions in 2016. That said, there are still several major serviced office operators not yet present in Birmingham, particularly those providing co-working environments.

The picture will likely change significantly in 2018 as the city is an obvious choice for those reaching saturation point in London. However, if more occupiers seeking sub-5,000 sq ft space focus on flexible offices, this will present challenges for those at the smaller end of the traditional leasing market. Landlords will need to adapt to stay relevant.

The general evolution of the workplace is also starting to impact occupier requirements and consequently what owners are delivering in terms of base build and Category A specification. The amenities on offer within office buildings and the immediate surrounding area are now a critical factor when occupiers select buildings and this will likely become more pronounced throughout 2018. One example is 9 Colmore Row, where owner Aberdeen Standard is reconfiguring the reception and vacant office space at the entrance of Snowhill station, an area with a diverse range of wider amenities.

Looking beyond the city centre, more speculative development out of town on the M42 corridor is needed to meet latent demand. The only current example is Blythe Valley Park, where IM Properties is speculatively developing a self-contained building, which has aptly been named First.

Further information

Read more: Spotlight: Birmingham Offices