The decision by Berkeley Group, a name synonymous with luxury development, to enter the Birmingham residential market with a new brand, or at least explore opportunities there, has taken many by surprise.
While a UK renaissance in inner city living has been steadily growing, led by Manchester and Bristol, the Midlands residential market has often been perceived as playing second fiddle.
But Birmingham has changed enormously over the past five years with major developments such as the John Lewis-anchored Grand Central, and there is more change to come. Berkeley has spied an opportunity and is launching the St Joseph brand in the city, led by managing director Paul Savidge, to capitalise on the arrival of HS2 and major office relocations.
A fresh start or a return?
“Berkeley kickstarted city centre living in Birmingham, with Symphony Court, which was before the Crosbys and Lendleases moved in,” says Stuart Eustace, an associate at Knight Frank’s Birmingham office.
Its development at Brindleyplace in the late 1990s was one of the first to show the turnaround in the city centre. The development of flats at the Mailbox was one of the last before the recession.
In between and after, plenty of others got involved, with national names such as Taylor Wimpey, Barratt, Lendlease and Crosby all building.
Post-recession, it has been quieter, but is again on the rise. The inner city charge has been led by PRS operators keen to secure a foothold in the city and take advantage of the lower land values and growing incomes of Birmingham residents.
Disposable incomes in Birmingham rose by 12% to £13.6m in the past four years, according to research from UHY Hacker Young. House prices have risen by at least 5% each year for the past three years.
New-build city centre pricing, where supply is far more restricted, is even stronger. The city council, led by director of planning and regeneration Wahid Nazeer, has also been extremely proactive.
“Birmingham is on the rise, with a can-do council that seems keen to encourage development,” says Berkeley chief executive Rob Perrins.
Push or pull?
There’s also the push factor, in that while the regions are booming, the massively inflated London market is slowing. Berkeley is a dominant presence in the capital and the Birmingham move is partly about diversification. However, it would have to buy a lot of sites in Birmingham to make any dent in diversifying its London exposure.
“Diversification is important to the housebuilders, but I am not sure about push factors,” says Neil Chegwidden, residential director at JLL.
“It’s more the pull factors changing the city centre landscape. Birmingham is on its way towards that. It’s not a leading light, but it’s getting there. The PRS development taking place demonstrates the appetite for city centre living.”
The huge infrastructure investment sparked by HS2, which will make it faster to get from Birmingham to central London than some of its own suburbs, is being accompanied by a slew of large office occupier relocations, from HS2 to HSBC.
This, coupled with considerably cheaper living costs, is attracting more people to Birmingham.
“Something we have seen within London is more and more people moving to better value locations, as affordability has become more important,” says Chegwidden.
“Obviously places like Birmingham have much lower price points compared to London, so they become important for residents and developers.”
Land supply
But one issue for those looking to expand into Birmingham is a lack of available development land.
“What the PRS market has done really is take away some of the grade-A sites from the open market, which has put real pressure on supply,” says Eustace.
There is about 1m sq ft of office space coming out of the ground, which residential has to compete with, alongside retail and PRS. Suddenly Birmingham is looking a lot busier.
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