The region’s office and industrial sectors have seen increases in activity. Compiled by Stacey Meadwell
Offices
EG asks
With speculative development off the menu, are office refurbishments the only viable option in the West Midlands and, if so, why?
“Where timing permits, design-and-build will increasingly become a serious option for occupiers unable to identify suitable vacant space in their search area. Extensive refurbishment schemes will undoubtedly take place as owners seek to protect asset value and improve competitiveness in market sectors where oversupply is less of a concern.”
David Tonks, DTZ
“With letting risk restricting development to projects with substantial prelets, refurbishments will be landlords’ best solution, especially given the tax breaks provided by business premises renovation allowances.”
Alan Hampton, Gerald Eve
“Refurbished space has good appeal, and take-up figures from 2011 show that occupiers were attracted to this space. However, refurbishment is not the only option. Although development funding entails strict criteria, such as the likelihood of a prelet, there are opportunities for development, and we are actively assessing opportunities.”
Ian Martin, Lloyds Bank Corporate Markets
“On the basis that new office development only ever delivers grade A space, then, yes, it could be a challenge to deliver sufficient supply to accommodate projected lease expiries. However, the corollary is that educated or well-advised occupiers will plan further ahead and prelets will become the order of the day again.”
Ian Stringer, GVA
Comment
Gary Moughton, EGi researcher
All the signs are pointing to 2012 being an important year for investment in Birmingham. Office take-up for 2011 was up on 2010, and the number of major lettings (20,000 sq ft-plus) was also higher than the previous year.
The figures were helped in some part by The Law Society taking 57,000 sq ft at The Cube, and the Ministry of Justice moving to nearly 40,000 sq ft of space at The Axis, Holliday Street. Surely, this is a sign of more confidence in the Birmingham market?
This month saw Bruntwood finally purchase the 208,000 sq ft Centre City building next to New Street Station. A further £4.7m will be spent on the refurbishment. The government has also given a green light for work to begin on the £128m planned extension of the Midland Metro through Birmingham city centre.
The plan is to link the newly renovated New Street Station to Snowhill, where construction has started on the 302,500 sq ft Two Snowhill office scheme, due for completion in 2013.
However, the problem is that Two Snowhill is the only development that is due to be completed in the next two years, at a time when the supply of grade A space is dwindling.
EGi’s figures show that, in the past 12 months, there was a drop of almost 15% in new-build pre-construction availability.
There is much in the planning stage for the city. Architects are drafting bold developments, such as those within Birmingham’s Big City Plan – the multi-use Pentavia and the Southern Gateway, for example. Getting them off the ground will be key.
So, as Birmingham’s delegates head off to Cannes for MIPIM this week, for which it has 14 events planned, and as the competition for international investment begins, no doubt there will be many hoping that the sunshine brings more than just sun-tanned faces.
West Midlands Industrial
Comment
“The noticeable increase in take-up at the end of 2011 of large industrial and warehouse buildings in the West Midlands has been fuelled mainly by the manufacturing sector, with buildings totalling more than 300,000 sq ft being taken by Plastic Omnium, TTAS and Aston Martin, reinforcing the importance of the car industry to the region. This trend is likely to continue into 2012, with the construction and opening of the new JLR engine plant at i54, which is expected to generate a significant amount of demand from tier 1 suppliers. However, the amount of available grade A space is now at such a low level, that construction of new buildings during 2012 seems inevitable.”
Simon Lloyd, head of industrial & logistics, DTZ
