With mixed-use city centre regeneration schemes including Arena Central and Paradise both underway, Birmingham’s traditional office core is expanding to previously fringe areas. Innovation and flexibility in funding, tenure and design is bringing forward complex sites, resulting in the highest level of construction activity since the Global Financial Crisis.

Shifting focus

Strong commercial occupier requirements combined with a shortage of developable sites in the traditional core has encouraged developers to look beyond the former inner ring road and into previously fringe areas. The redevelopment at New Street station has improved access to the west of the station, supporting growth at Brindleyplace and Arena Central.

The first phase of 1.8 million sq ft of mixed-use development is currently underway at Paradise, of which PwC have pre-let 150,000 sq ft of office space. Arena Central will also provide 670,000 sq ft of office space when fully developed, of which the UK Government pre-let 240,000 sq ft at 3 Arena Central, whilst HSBC signed for 212,000 sq ft at 1 Centenary Square. Nearer the traditional core, Ballymore's 420,000 sq ft scheme at Three Snowhill shows significant confidence in the Birmingham market, and is expected to complete during Q1 2019.

Growth beyond the city core is likely to continue over the coming decade, shifting both to the east and west of the city. The Axis redevelopment proposals are for up to 1 million sq ft adjoining Arena Central. The Birmingham Curzon Masterplan, supported by the arrival of HS2 anticipated the delivery of 4,000 new homes and 6.5 million sq ft of employment space. Within the masterplan area, there are several enterprise zone sites, particularly in Digbeth, where a tech and creative hub is emerging. Further out, the link between the city centre and Birmingham Airport will be a key corridor for growth.

New entrants in the residential market

Residential development in the city centre is also diversifying. It has not traditionally been an area of focus for the major housebuilders. But more specialist developers are looking to Birmingham as the market slows in London, such as Berkeley and Galliard. The result of this influx of these developers and institutional funders to the city centre is that local and regional developers are looking for opportunities beyond the city centre. With many housing associations looking to begin delivering new homes for market sale alongside affordable housing, there is potential for further expansion.

Developers are also looking beyond the open market sale model; there are 12 build to rent schemes currently in the pipeline. A variety of tenures on offer can increase absorption rates and help those struggling with affordability pressures. But this means build to rent developers cannot just target the top end of the market. There is a need for good quality, affordably priced stock suitable for young professionals and families. Delivering this type of stock will require funding with a focus on longer term income returns rather short term recycling of capital.

^{Source: Savills Research}