A flurry of ambitious development schemes including build-to-rent towers topping 40-plus storeys will be key features of Birmingham’s property market in 2019.
Court Collaboration’s chief executive Anthony McCourt says the residential market is likely to be dominant, with plans for high-rise buildings already underway. He comments: “I would look out for a series of significantly tall buildings beginning construction, which will change the city skyline permanently.
“I see 2019 as the year when the BTR market really begins to take shape across the regions. It will be interesting to see how other Midlands cities and areas push forwards on the back of a hot Birmingham city centre market and I would also look towards suburban areas of Birmingham and the Midlands generally bringing forward developments of scale.”
Mark Lee, chief executive at Calthorpe Estates, says: “Strong investor interest in the BTR sector in Birmingham will translate into further commitments to developments from both UK and overseas funds.”
In 2018, Grainger agreed to forward-fund and acquire Nikal’s Exchange Square, which includes a 46-storey residential tower.
Nikal’s plans are set to top Moda’s 42-storey tower at Broad Street. Moreover, as BTR takes off, there are murmurings of other taller towers from Berkeley and Court Collaboration.
City schemes
The year has kicked off with Birmingham City Council’s announcement that it has chosen Lendlease as its development partner for its £1.5bn Smithfield scheme.
Waheed Nazir, corporate director of economy for Birmingham City Council, says this is the “missing link” in Birmingham. Smithfield will offer 2,000 new homes and more than 3m sq ft of commercial, retail and leisure space.
He adds: “I’m confident that the investment we’ve made in infrastructure together with the breadth of talent that is available will mean that the city centre will attract some significant occupiers and relocations in 2019.
“The ensuing positive impact on rental levels will also mean that the city continues to represent an attractive proposition for investors.”
This year will also see highly-anticipated updates on Hammerson’s revised plans for Martineau Galleries and the development partner selected for the University of Birmingham’s £300m Life Sciences Park.
In addition, limited supply and rising rents combined with improved transport links could lead to more office development expanding outwards from the core city centre, says Phil Carlin, managing director at SevenCapital.
“We’re likely to see an increased focus in particular on Digbeth and the Eastside area of the city. Development has already begun in parts of this area, kicking off the process of gentrification. As we get closer to HS2 becoming a reality we will see this activity heightened with current and planned projects coming to fruition and demand for both commercial and residential space increasing.
“The demand for Grade A office space within the city has never been higher. With a significant amount pre-let, we will find that as 2019 progresses, availability may reduce, in which case competition for prime spaces will increase and push rents higher.”
Lee says progress on the combined 26.2 acres at Paradise and Arena Central will see Birmingham’s business district expand into the west and Edgbaston. Calthorpe Estates hopes to secure funding to bring forward the first phases of construction at its £330m New Garden Square regeneration, which will seek to offer 500,000 sq ft of office space and up to 400 flats.
David Smeeton, capital markets partner at Cushman & Wakefield, says rising build costs on top of limited supply will drive rents up.
“We anticipate yields remaining firm for Grade A, low asset management buildings that are let on medium to long term leases to good covenants,” he says.
But despite relatively stable yields, investor apprehension will likely dampen activity in the coming months. Smeeton warns: “There could be a very cautious period until March as the Withdrawal Agreement comes into effect and we leave the EU.”
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