Source: Savills Research
Brindleyplace acquisition sees first quarter office investment reach £323 million
Market Snapshot
■ Take-up reached 129,520 sq ft in Birmingham city centre during the first quarter of 2017, 3% above the 10-year first quarterly average.
■ The key deal was Arcadis Consulting taking 22,953 sq ft over two floors at Cornerblock, formerly known as Two Cornwall Street, set to complete imminently.
GRAPH 1Take-up by quarter
■ The most active business sector during the first quarter was the engineering sector, which accounted for 18% of take-up. We expect a number of engineering firms to remain active over the next two years in the wake of HS2.
■ With a shortage of large deals in the first quarter, 49% of deals were in the sub 10,000 sq ft size band, above the long-term average of 38%.
■ We expect total take-up for the city centre market to reach 750,000 sq ft during 2017, following the large requirement from HMRC.
■ Following the arrival of 55 Colmore Row, total supply saw a 4% increase to 2.6 million sq ft since the end of 2016. 55 Colmore Row currently provides 112,000 sq ft of available space following a comprehensive redevelopment.
■ Prime Grade A availability has increased from 552,000 sq ft to 576,000 sq ft, which is only enough to cater for around 18 months worth of Grade A demand.
GRAPH 2Availability
Source: Savills Research
■ Top rents stand at £32.50 per sq ft, but we expect this to grow beyond the historic headline of £33 per sq ft as prime developments near completion toward the end of 2018.
■ The much anticipated delivery of Three Snowhill (pictured above) will provide further Prime Grade A space on completion in 2019.
GRAPH 3Top rents
Source: Savills Research
■ The first quarter of 2017 saw £323 million of office investment in Birmingham, over three times the 10-year quarterly average.
■ This was largely down to HAIL's (HSBC Alternative Investments) record £265 million acquisition of Brindleyplace, reflecting a yield of 6%.
GRAPH 4Office investment by quarter
Source: Savills Research, Property Data
■ Overseas investors remain the dominant investment type in Birmingham, following Alduwaliya's £22.5 million purchase of 111 Edmund Street. With a weak sterling, regional offices remain attractive to the overseas market.
■ However, the UK institutions have a presence in Birmingham during 2017, following the West Midlands Pension Fund's £26 million purchase of 2 St Phillips Place.
■ Birmingham's prime yields currently stand at 5.25%, in line with the average prime yield across the UK regions. We expect yields to remain stable through 2017, with sustained demand for well let assets.
TABLE 1Significant Deals in Q1 2017