Birmingham will continue to miss out on further majorinward investment opportunities because of the lack of available Grade A office space in the city, a property expert has warned.
The recent announcement that Bank of New York is to set up a new financial services operation in Manchester, to complement its UK headquarters at Canary Wharf, has come as a blow to Birmingham.
The deal - 92,000 sq ft at Argent's Piccadilly Gardens - is one of the biggest office lettings in 25 years and represents 350 jobs. According to Julian Shellard, chairman of regional business at the Birmingham office of property advisers CB Richard Ellis, Manchester was able to offer the bank a choice of three prestige buildings. As well as Argent's One Piccadilly Gardens, Bruntwood Estates' Piccadilly Station and Peel Holdings' Alexandra building were short-listed.
"In contrast, Birmingham could offer nothing to satisfy this requirement. As a result, we weren't even on Bank of New York's radar," he said.
Mr Shellard says that Birmingham needs to start developing more office space if the city is to take advantage of a growing trend among bluechip businesses to decentralise their operations out of London.
He said: "More and more companies are starting to look at their overhead costs. The price of a London address and workforce is considerably higher than in the regions. It makes economic sense."
According to CB Richard Ellis's recent Global Rents survey, Birmingham is the second most expensive city in the UK to rent an office. London is first, with Manchester third.
In London's West End, top rents are currently #75 per sq ft per annum and in the City they are #43.50.
In Birmingham, costs are #27.50 per sq ft - less than half the London average. In Manchester, occupiers can expect to pay #26 per sq ft.
What's more, occupation costs in the capital show no signs of reducing, with rents continuing to climb and space becoming more scarce. But Mr Shellard believes that cost is not the only factor.
He said: "Many large-scale occupiers are starting to realise that the attractions of the regions are not just limited to overhead savings.
"The cost of housing, access to transport and cultural amenities mean that workers can enjoy a much higher standard of living than they can in the capital."
It is these benefits, along with the potential to reduced overheads, which has prompted the Government to look at its own property requirements.
Former Birmingham City Council chief executive, Sir Michael Lyons, has delivered a report to the Chancellor's office which envisages more than 20,000 civil servants moving out of the capital by 2010.
Birmingham's inward investment agency, Locate in Birmingham, and regional development agency, Advantage West Midlands are working hard to ensure that Birmingham attracts at least one government department.
But Mr Shellard is concerned that they don't have the product to work with.
He said: "No matter how much effort these agencies put in, and no matter how hard organisations like Marketing Birmingham and the property
community work to raise the profile of the city, if we don't have the space to accommodate a requirement we won't even be in the running."
That Birmingham is able to attract 'footloose' requirements was recently demonstrated by the Gambling Commission's announcement that the city is its preferred location for its new UK base. However, the commission's 20,000 sq ft requirement is much more modest.
Developers too have fought shy of building speculatively unless there is proven demand. Mr Shellard claims that unless there is sufficient stock, there will be no demand.