Pushing ahead: Despite talk of a difficult year, the West Midlands is determined to maintain its momentum with a host of developments
From construction sites to development pipelines, the West Midlands’ property market is doing its best to defy the doom-mongers, as building begins apace in response to occupier demand.
Offices: steady as she goes
After the The Royal Institution of Chartered Surveyors’ Commercial Property Survey reported recently that tenant demand for all types of commercial property had fallen to 2003 levels, Birmingham agents are hoping that their region will buck the trend and see a surge of city centre leasing activity.
Not least because this year sees the completion of some substantial chunks of grade-A space. For example, Carlyle Group’s 300,000 sq ft Colmore Plaza, Saxan Securities’ 123,500 sq ft 45 Church Street, and a 125,000 sq ft chunk at Ballymore’s Snowhill.
Martin Guest, managing director of CB Richard Ellis’ Birmingham office, remains upbeat. “It’s set to be a bumper year for take-up,” he says. “There are some major requirements out there from the likes of HSBC, Barclays, Wragge & Co and Deutsche Bank, and they’ve suddenly got a lot more to choose from. That’s particularly important for a city wanting to attract more inward investment.”
Jones Lang LaSalle’s head of office agency, Jonathan Fear, is also optimistic, predicting that take-up could top 1m sq ft, compared to around 660,000 sq ft in 2007. “We’re also likely to see some healthy rental growth,” he says, “perhaps reaching £33.50 per sq ft by the end of the year.” This would compare to £32.50 per sq ft at the start of 2008.
Coventry agents are also hoping that 2008 will bode well for their city. After years in the doldrums, Coventry’s office market has been buoyed by two major coups: the Qualifications and Curriculum Authority chose Coventry over Birmingham and Nottingham as the location for its new 80,000 sq ft headquarters at MCD Developments’ The Butts, while Stoford has secured a 140,000 sq ft prelet to Severn Trent for its city centre site at St John’s.
Developers are keen to catch this momentum, delivering much-needed grade-A stock. Canon Kirk has secured planning permission for the first phase of its 3m sq ft Friargate project around Coventry station, to comprise around 200,000 sq ft of offices, while the site is about to be cleared for Axa and Stoford’s new 72,000 sq ft office scheme, 1 Bishops Place.
In the Black Country, a host of regeneration schemes are likely to include significant commercial elements. Neptune Developments is poised to submit a planning application for more than 400,000 sq ft of offices at its Interchange scheme in Wolverhampton Stoford is preparing to start construction of its All Saints scheme in West Bromwich following a 120,000 sq ft prelet to BT and Walsall Regeneration Company has unveiled plans for its 1.7m sq ft Gigabyte office zone. The urban regeneration company is looking for development partners to deliver the first phase, comprising 300,000 sq ft of offices and an 80,000 sq ft fibre-optic technical centre.
Meanwhile, the region’s out-of-town market is faring well.
“Occupier demand is definitely picking up,” says Andy Venables, partner at GVA Grimley.
“Sites such as Birmingham Great Park and Wolverhampton Business Park have secured some major lettings in the past few months. In Wolverhampton, rental growth has outstripped the regional average to reach £16.50 per sq ft.”
Retailers spoilt for choice
Demand for retail space fell faster than at any time in six years and confidence in the retail sector dropped a further 36% in the third quarter of 2007, according to the RICS research.
Retailers are nursing their wounds after poor Christmas trading and, in the midst of economic uncertainty, canny retailers are either putting acquisitions on hold or demanding ever-softer deals from landlords. This will be felt most in pitches already suffering from low demand.
But in a quest to stay ahead of the game, regional shopping centres are vying to move up the retail hierarchy, with developers delivering a host of ambitious new schemes.
Birmingham Development Company is adding an extra 60,000 sq ft of retail at its mixed-use extension to the Mailbox and, further into the future, Bullring developer Birmingham Alliance plans to deliver as much as 900,000 sq ft of new shopping at Martineau Galleries.
In Coventry, the city council and key commercial landowners have appointed international architect the Jerde Partnership to create a £1bn retail masterplan for a new city centre, doubling the number of shops on offer (see feature, page 16).
Dudley is also celebrating a retail renaissance after news in January that the Department of Communities and Local Government has finally granted Brierley Hill town-centre status. This paves the way for a £1bn regeneration programme, including more than 500,000 sq ft of additional retail space to integrate the high street, Waterfront and Westfield and QIC’s Merry Hill shopping centre (see profile, page 46).
Elsewhere, Multi Development UK is about to start on site to provide 550,000 sq ft of retail at its Summer Row development in Wolverhampton, and S Harrison Developments is pressing ahead with its Friargate centre in Lichfield, including 140,000 sq ft of shops. In Edgbaston, Calthorpe Estates has begun delivering £200m of retail-led development at Edgbaston Galleries and Edgbaston Mill.
However, Paul Brewer, retail partner at GVA Grimley in Birmingham, remains sceptical about whether all of the West Midlands’ pipeline projects will reach completion. “There’s a lot of new development being talked about,” he says, “but with retailers so cautious, it’s going to be difficult to fill them all, particularly if they’re yet to secure decent anchors.”
Agents also voice concerns about occupier appetite in the region’s out-of-town market. “These are difficult times, particularly for sectors such as electrical and furniture,” says Brian Thompson of Birmingham retail agent Thompson Heaney.
Shed demand unabated
Demand in the West Midlands’ industrial market remains healthy in the face of wider economic pressures. “Despite yields moving out, land prices haven’t yet showed signs of dropping,” says Mike Price, industrial agent in the Birmingham office of Knight Frank. “There are still plenty of developers wanting to get into the market, backed by strong occupier demand.” Goodman, for example, has secured a 400,000 sq ft prelet to PalletForce at RD Park in Burton upon Trent.
Although the market awaits a significant post-Christmas land sale to give a true reflection of where prices are going, recent deals suggest that, although there may be fewer bidders, those with money are still prepared to bid aggressively.
A new regional record was set in March last year when Chancerygate paid around £750,000 per acre for the former HP Sauce factory site in Birmingham, and Gazeley is rumoured to be spending around £600,000 per acre on a 10-acre site in Nuneaton.
Occupier appetite, particularly for larger units, continues to fuel speculative development. ProLogis is about to complete a 106,000 sq ft unit at its 300-acre park in Coventry and is gearing up to start construction of two buildings at Midpoint in Minworth.
Elsewhere, Prudential has just completed a 120,000 sq ft shed at Birmingham’s largest brownfield development site, The Hub, and in the Black Country, Coltham Developments is on site with its 340,000 sq ft Citadel scheme.
Opus Land is about to deliver its 460,000 sq ft Opus Axis refurbishment in Burton upon Trent, while Gazeley has committed to a 700,000 sq ft unit at G-Park in Rugeley.
In Tyseley, Mucklow has begun speculative construction at Signal Point, the first phase of development of the former Yuasa battery site.
Developers are hoping that, by the end of 2008, rents will finally break the £6 per sq ft barrier. “They’re having to compensate for rising costs and falling capital values,” says Richard Lawrence, director at Colliers CRE’s Birmingham office, “but it will depend on market dynamics. In April, when vacant building rates kick in, tenants may win back some advantage as landlords offer better incentives to fill their vacant space.”
The general forecast does, however, remain positive, with most agents believing that the West Midlands market will remain robust. “It might be a tough year, but things haven’t come to a standstill,” says GVA Grimley associate Mark Fitzpatrick. “As long as occupiers are on the lookout, there are still plenty of deals to be done.”
West Midlands retail rankings
Birmingham is expected to retain its dominant position
| Centre name | 2007 UK rank | 2017 UK rank* | Change in rank (2007 – 2017) |
| Birmingham | 3 | 3 | 0 |
| Merry Hill | 26 | 28 | -2 |
| Coventry | 43 | 51 | -8 |
| Wolverhampton | 52 | 47 | +5 |
| Solihull | 77 | 86 | -9 |
| West Bromwich | 220 | 167 | +53 |
| Lichfield | 289 | 225 | +64 |
*Predicted
Source: Experian
