Birmingham snapshot - July 2013

Overview

• Net stock absorption of office space turned negative across Birmingham in H1 2013 but the anticipated completion of a number of deals in advanced stages of negotiation will see the that trend being reversed in H2 2013. Total absorption for all Grades across the entire Birmingham market was -97,357 sq ft, the lowest figure for 12 months. A combination of increasing vacancy of Grade C product coupled with the completion of Two Snow Hill (169,000 sq ft of available space, which includes space set to be released by anchor tenant Wragge & Co) caused uplift in overall availability. In contrast, Grade A absorption remained positive for the eigth half year period in succession, up by 77,447 sq ft.
   
• Regardless of rising availability, take-up remained robust, marginally up on figures for H2 2012 at 336,937 sq ft. The key deal of the period was the pre-let of 134,000 sq ft to an unnamed tenant at 5 Brindleyplace. We expect end of year take-up to come back in line with the 10 year average (680,000 sq ft).
   
• With the completion of Two Snow Hill and pre-letting of 5 Brindleyplace, this now means that there is now no speculative office space under construction within the central Birmingham market. Kames Capital and Sterling Property Ventures’ 55 Colmore Row is expected to complete mid-2016. The lack of development space set to come to market over the next three years is likely to help accelerate absorption of Grade A offering during H2 2013. While Birmingham does have a number of major pipeline projects, these are all longer term opportunities
   
• Prime rents currently stand at £27.50 psf. While we expect Grade A availability to fall once more in H2 2013, given the nature of current Grade A supply and shortage of new development product, headline rental growth may be constrained until 2016. However, net effective rents are likely to rise as rent-free periods and incentive packages are reined in by landlords.