Birmingham Offices Continue Growth Trend In 2016

Birmingham: The First Stop for Companies Looking for a ‘Cost Effective’ Area of the UK

BNP Paribas Real Estate forecasts 8-9% total returns for Birmingham offices in 2016 as dearth of Grade A space pushes prime rents to £32 per sq ft. Research finds overseas investment drove Birmingham office investment to £726m in 2015, the highest volume outside of London.

The global real estate adviser underlined that Birmingham’s growing economy, ongoing investment in infrastructure and strong demographics meant it was well placed to take advantage of its ‘second city’ status and tempt further large corporate occupiers to follow Deutsche Bank and HSBC in relocating from London.

“With the youngest population of any European city and its relatively low cost of living, Birmingham has become the first stop out of the capital for companies looking to relocate to more ‘cost effective’ areas of the UK,” said Simon Robinson, Head of BNP Paribas Real Estate’s Birmingham office.

“With the arrival of HS2 within the next 10 years we believe Birmingham is attracting further attention from large corporates looking for an alternative to London.”

Research has shown that Birmingham office investment topped £726m in 2015, an increase of 49% on 2014 and the highest of any city outside of London. Overseas investors accounted for almost half (46%) of the total investment, up from 12% in 2014 while UK institutions made up a third (32%) of the total, half their 2014 share of 62%.

A surge in take-up led to 1.47m sq ft of deals across the city centre and out of town markets. Take up in Birmingham central reached 970,458 sq ft, up 36% on 2014.

Strong occupier demand coupled with pre-let activity had seen Grade A supply evaporate in Birmingham. BNP Paribas Real Estate forecast that these market fundamentals would ensure prime rental growth to £32 per sq ft by the end of 2016.

Andrew Meikle, Head of Birmingham Investment at BNP Paribas Real Estate, said “The strong occupier market witnessed in the last couple of years, coupled with the dearth of new supply coming to the market, means we anticipate seeing aggressive levels of rental growth moving forward, particularly on prime offices”.

“We forecast 8 to 9% total returns on average for Birmingham offices in 2016, driven by both capital and rental growth, but would anticipate even stronger returns on prime product.”