Deutsche Bank expanded its presence in Birmingham earlier this year by taking 27,600 sq ft in Baskerville House. This is in addition to the space it occupies at One Brindleyplace.
The move is part of the bank’s strategy to create a series of globally-connected operating centres. Birmingham was selected as a support arm for London ahead of rival cities, such as Manchester, for a number of reasons.
Jan Teo, chief operating officer at Deutsche Bank, says: “The proximity to London was important, and we were particularly interested in the labour pool and availability of talented people. We’ve made a success out of this location and proved we can do it.”
Advantage West Midlands’ inward investment and access-to-finance teams also played a key role, thanks to a £1m Selective Finance for Investment in England grant. A further grant of £675,000 was offered to the bank, which has created over 500 jobs in the city.
Several options were open to Deutsche Bank when it began its quest for additional space, including Colmore Plaza and Two Colmore Square.
Teo says: “It comes down to what space is available at the time. The key factors for us are the proximity to transport links, that the area is commensurate with our brand, and that there are great facilities for our staff.”
With both of the bank’s Birmingham leases believed to be up for a break in February 2014 there is a distinct possibility of future consolidation. This could prove perfect timing for Ballymore’s and Hines’ Two Snowhill, due to reach the market in 2013.
As 2011 approaches its end, office agents across Birmingham are breathing an audible sigh of relief. Against the odds, the market has not fared as badly as expected, and at 220,000 sq ft, take-up statistics for the third quarter have been the best of the calendar year.
With a couple of further deals simmering below the surface, most agents expected the final year figures to be on a par with the 10-year average at around 600,000 sq ft – if not a little higher.
“I think we’ll end up a smidgen ahead of the long-term average,” says John Griffiths, director at GBR Phoenix Beard. “We’ve bumped along the bottom, but there’s been steady demand right across the board.”
Much of this take-up has been comprised of small deals, but they all add up. Rents are holding up at around £28 per sq ft, but incentives of up to three years rent-free on 10-year-leases are still been doled out to keep them there.
Amid the churn, there have been only a handful of headline-grabbing signings, but two deals which have been a long time in the making look set to be completed by the end of the year.
Grant Thornton has 27,000 sq ft under offer at Colmore Plaza, which will leave 178,000 sq ft available at Carlyle Group’s scheme. Andrew Venables, a partner in GVA’s Birmingham office, says there is now “strong interest in a proportion” of this remaining space.
Detailed discussions
And Rupert Young, development director at Nurton Developments, says it remains in detailed discussions with the Law Society about its plans to consolidate two offices in Leamington and Redditch into 55,000 sq ft at Two Colmore Square.
Once this space is occupied, prime grade A office space in Birmingham will begin to look a little scant. The only new grade A space in the pipeline is Ballymore and Hines’ 305,000 sq ft joint development at Two Snowhill.
Young says: “An occupier coming to the market seeking 60,000 sq ft in the next nine months will have very limited options.”
However, it seems there are only a few requirements of this size in evidence, most of which are long-standing ones, such as AIG’s and Lloyds TSB’s.
Overall, the demand has been eclectic and, even at the prime end, occupiers are often seeking smaller floorplates of 10,000 sq ft and less.
Venables says: “In the main, occupiers are focusing in on the costs and how to reduce them. In many cases they’re consolidating two or three locations into one, and increasing occupational density to achieve more desks in less space, and that trend is going to continue.”
Mailbox scheme
With an estimated 1m sq ft of lease expiry/break option events coming up from now through to 2015, there is the prospect of activity in the coming years. But no one is in any rush.
Brockton Capital is taking its time with the mixed-use Mailbox scheme, which will contain 45,000 sq ft of office space. Ashley Hancox, head of regional office agency at CBRE, which is office agent on the scheme, says “plans are still being formulated”.
Meanwhile, Kames Capital (formerly Aegon Asset Management) and Abstract Land are pushing ahead with the £30m refurbishment and extension of 55 Colmore Row. Plans include refurbishing the 128,500 sq ft building to grade A standard and extending the top floor to include an extra 20,000 sq ft of space.
Outside of Birmingham city centre there are mixed fortunes. Where there are success stories – such as Blythe Valley Park, which is 96% let – there are also challenges – rents at Birmingham Business Park are understood to be sub £15 per sq ft, with generous incentives attached.
All eyes are on emerging new space, which will act as a barometer for demand. This includes the first phase of Birmingham council’s Digital Plaza hub at the Birmingham Science Park in Aston, which is due to be started next year.
However, with developer confidence still low, many other schemes will continue to lay dormant.
Jonathan Wallis, development director at Miller Developments, says: “Our view has changed, given the way the economy has gone, and we were a lot more confident three months ago than we are now.
“We can see that the market is going through another period of stagnation and much of it is about perception.
“Occupiers can’t be seen to be making an expensive move. I think the attitude is, we won’t get it wrong if we stay put.”
Although there may be a sense of relief that 2011 was not as bleak as expected, few are under any illusions that 2012 is going to be quite as pain free.
