Grade A space was more popular than ever in the Birmingham office market during 2008, according to the latest research from Savills.
Take-up in the prime core of the city at the end of quarter three stood at 606,292 sq ft when analysing deals over 3,000 sq ft, surpassing the five-year average of 408,065 by 49 per cent. Grade A space accounted for 82 per cent of total take-up in the first three quarters.
The report also found that the professional sector dominated this take-up, accounting for 51 per cent of the space occupied, which was mainly due to the substantial acquisition of 256,000 sq ft by Wragge & Co at Snowhill while the banking sector held the second biggest market share with 17 per cent of the total take-up.
Nick Williams, director at Savills, said: “Whilst these significant lettings in the first three quarters of the year have boosted the take-up figure, we have also noted a marked increase in demand for high-quality grade A office space in general throughout the city.
“There are a number of new developments in the pipeline due for completion over the next few years typified by 103 Colmore Row by British Land, which will supply 284,000 sq ft of prime office space. With over 600,000 sq ft of requirements currently active in the market and a marked increase in demand from the professional and banking sector, there is an opportunity for much of the new space to be occupied.”
The report found that total supply fell by two per cent during the third quarter and stands at 1.4m sq ft with the vacancy rate now 12.8 per cent.
The Savills’ research shows there is still upward pressure on rents for grade A space, with the highest rent for 2008 so far set at £33 per sq ft at Snowhill. Rents on well-located grade A refurbished buildings have also experienced high levels of growth over the past two years with the best space now achieving £27.50 to £28 per sq ft.
Clare Burke, from Savills’ research team, said: “Birmingham’s occupational market has shown resilience during the first three quarters of 2008. With the size and quality of buildings coming to the market in the next few years, we expect to see grade A rents become firmly established at £30 per sq ft in 2009, with the opportunity for further growth in 2010.”
When analysing Birmingham’s investment market, the research shows yields have now corrected in a significant outward direction that is consistent with the UK market as a whole. Prime yields now stand about 6.25 per cent compared with sub 4.50 per cent during the same period in 2007. Jonothan Holmes, director at Savills, added: “Investor appetite for core Central Business District prime and secondary product, where the rent and re-letting prospects are positive, is expected to continue even against the current economic climate.”