Britain’s proposed HS2 rail line and the out-of-town market have given the West Midlands’ office market a huge boost this year, according to global real estate adviser Cushman & Wakefield.
The out-of-town market has seen a number of large deals, and is already 50 per cent ahead of its normal annual level, and HS2 is beginning to spark a growing demand for space from firms anxious to take advantage of the project.
Scott Rutherford (pictured), head of Cushman & Wakefield in Birmingham, said a 100,000 sq ft letting at Two Snowhill this year to HS2 itself was imminent, and he added: “This will be the biggest deal of the year.
“There is also a perception that this letting will prove a turning point in the fortune of the market, as there will be a significant multiplier effect following this transaction, as other businesses seek to relocate to Birmingham to derive work from this major project.”
He added that the recent announcement about HS3, which will connect Birmingham to Britain’s northern cities via the two routes that HS2 will take from the Midlands to Manchester and Leeds, could provide further impetus.
The other good news for the office market is how the out-of-town sector has performed in the West Midlands. There have been 308,000 sq ft of lettings so far, with major deals including IMI and Pinewood at Birmingham Business Park (36,000 sq ft and 22,000 sq ft), Steria at Trinity Park 3 (17,000 sq ft), and UTC at Fore (26,000 sq ft).
Mr Rutherford said that the out-of-town market normally generated around 200,000 sq ft of lettings each year, and with a further 100,000 sq ft of deals in the immediate pipeline, the sector was on course for a phenomenal year.
Mr Rutherford said: “Earlier in the year, we said that the M42 corridor was experiencing a major upsurge in demand, a trend mirrored by the Thames Valley market, currently the hottest outside London.
“We are on course to see the market create more than double the average annual expectation of it.”
He said that the out-of-town market was being driven by demand from high tech industries, including aerospace and software, and the HS2 project would be a draw for those in the engineering and construction sectors.
One area of concern for the market is the lack of availability of Grade A office space in the central Birmingham market, which now stands at only 253,000 sq ft.
This is well down on the average annual take-up and Mr Rutherford said there is only one building in Birmingham that can currently offer significant Grade A space, which is Colmore Plaza (114,000 sq ft). The building can offer a block of 70,000 sq ft space to a single user.
He said: “There are already a number of businesses and organisations who are looking to secure the last of the remaining Grade A space.”
There are several large office schemes in the pipeline, including Arena Central and Paradise Circus, although neither is imminent. The first phase of Arena Central, which could create 34,000 sq ft of space, could start in 2017, and the initial phase of Paradise Circus will not be completed until the year after, at the earliest.