The demand for homes

In line with Birmingham’s economic renaissance, there is increasing demand for housing. Birmingham’s population is projected to grow by 150,000 (13.7%) by 2031.

The current Strategic Housing Market Assessment (SHMA) sets annual housing need at 4,057 new homes per annum, although the adopted target in the local plan is significantly lower at only 2,550 new homes per annum. Delivery in the year to March 2017 was still well short of this reduced target, at 1,750.

It’s not just in the overall numbers where delivery falls short. According to the 2013 SHMA, 38% of newly arising households need Affordable Housing, with the vast majority requiring homes for Affordable Rent. Although the balance of delivery of affordable housing was weighted towards Affordable Rent, overall affordable delivery only accounted for 20% of all new build completions.

What size?

It is also questionable whether the right mix of property types is being delivered. 54% of housing need is for three- and four-bedroom homes.

While we don’t have data on the breakdown of new homes by number of bedrooms, the distribution of new build property by floor space shows that 62% of new build sales in 2016 were properties of under 700 sq ft – suggesting that most new stock is one and two bedroom flats, rather than the family housing that is required.

This may be a consequence of the challenges of developing in the city centre, where sites require higher densities to be viable.

This underlines the importance of not just concentrating housing delivery in the city centre, but also allocating sites for housing in more suburban locations.

The recent release of greenbelt land for 6,000 homes at Langley is a positive step. But it will also be necessary for the surrounding local authorities to absorb overspill demand, particularly for family housing. To open up new sites, it will be crucial for the WMCA to continue to invest in the Metro rail network to maximise the potential of outlying stations. Homes within 2km of stations in the West Midlands have outperformed neighbouring areas by 12-16% over the past five years.

^{Source: Savills Research}

Changing demands for land

The pressure on demand for land is complicated further by Birmingham’s position as a hub for nationwide distribution, and as a centre for advanced manufacturing. Robust occupier enquiry levels show demand for industrial and logistics space in the Midlands is strong despite current economic uncertainty, pointing to a positive outlook for 2018 for the sector.

Those holding strategic land positions and able to deliver well located speculative schemes or build-to-suit options will continue to reap the rewards as overall demand outweighs supply.

The key driver of the location of logistics schemes is access to the national road network. Historic industrial land allocations that are more centrally located and linked to the canal network may no longer be suitable.

Consequently, industrial rents in well-connected areas such as the M42 corridor are outperforming the national growth rate of 2.5% per annum, and are expected to reach £7 per sq ft in 2018.

Similarly, sites developed in the 1980s and 1990s are not on the scale required for modern day use. Big sheds remain the preferred choice of new development, and occupiers are particularly looking for increased eaves heights and yard depths.

However, more small and medium sized stock of between 30,000 sq ft and 80,000 sq ft is still needed closer to the city centre thanks to the rise of e-commerce and demand for ‘last mile’ delivery hubs.