Corporate inertia will present the biggest challenge to Birmingham’s office leasing market over the next 12 months.

According to Jones Lang LaSalle’s Birmingham Offices Update for the second quarter of the year, occupier demand for office space continued to be subdued and any requirements that are in the market are taking longer to be satisfied as occupiers defer property decisions as they try and reduce capital outlay.

Whilst office viewings remained low, Jones Lang LaSalle did, however, record an increase in activity towards the end of the second quarter with viewings more than doubling in June, in comparison with April and May.

Jonathan Fear, head of Jones Lang LaSalle’s National Office Agency team in Birmingham, said: “Despite cuts in prime rents occupiers are looking towards cheaper space to fulfil their property requirements, with interest focussed on Grade B accommodation as cost saving remains high on the corporate agenda. With the continued uncertainty in the economy, occupiers remain slower to commit to office space and this will keep take-up volumes subdued and supply inflated.”

Take-up volumes fell in the second three months of the year in comparison to the previous quarter, down 22 per cent, although the actual number of deals that transacted increased. Market activity predominately sat in the sub-5,000 sq ft bracket, with 66 per cent of deals below this threshold with only one transaction over 10,000 sq ft completed. Over the year to date 195,440 sq ft has been let reflecting a drop of 66 per cent in comparison with the equivalent point last year.

The research found that for the second consecutive quarter space being returned to the market outweighed take-up, resulting in a fall in the volume of occupied stock. Over the last six months, the net absorption of space has been 132,720 sq ft.

Mr Fear added: “The first half of the year has seen a significant fall in take-up activity in comparison with last years record levels. Vacancy rates have increased to over 15 per cent, well above the five-year average of 10.3 per cent which will continue to put increasing pressure on landlords to cut rents and increase incentives in order to attract tenants. We anticipate that demand and, therefore, take-up volumes will remain low over the remainder of the year with a total take-up of less than 450,000 sq ft, compared to the ten year average of 610,000 sq ft.

“Tenants that are in a position to take space will be able to take advantage of the market conditions to secure highly competitive terms on certain buildings. With declining speculative activity, however, Grade A supply will begin to tighten from 2011 and occupiers will have to make decisions soon to avoid missing this window of opportunity.”