There’s no doubt about it, it’s an exciting time to be a business based in Birmingham.
From recent announcements regarding DLA Piper’s commitment to take 40,000 sq ft at 2 Chamberlain Square to new industrial occupiers at Prologis’ Birmingham Interchange, businesses are flocking to the city as a place to locate and do business in.
On the back of recent strong activity in the Birmingham property market, Carole Taylor, our Regional Managing Partner for Vail Williams Birmingham, takes a look at what the industrial and office market has to offer for 2020.
Industrial remains strong
The industrial market continues to be strong, particularly on the logistics side, a lot of which is linked to online deliveries.
We expect that, into 2020, there will continue to be a demand for big distribution units in strategic out of town locations next to motorway junctions, but there will be further increased demand for smaller distribution units of, say, circa 50,000 sq ft on the edge of conurbations for last mile deliveries.
There will also continue to be demand for manufacturing space but this is likely to become more bespoke as companies move more and more into high tech R&D rather than volume manufacturing.
Rents are currently top £6.00s psf now for new/good quality industrial of >20,000 sq ft and this will start to go beyond £7.00 psf shortly. Smaller units of up to 10,000 sq ft are already considerably higher than this in certain areas.
In Birmingham city centre at present, there is a considerable amount of high-quality Grade A space under construction, and quite a good supply of lower grade more compromised space at the other end of the scale.
Lower grade space isn’t as prevalent as it used to be because a lot of it has been converted to residential or leisure uses and there is a shortage of good quality but not top end brand new office space.
This will be remedied to a certain extent by comprehensively refurbishing the space that occupiers come out of to go into new space, such as PwC/Cornwall Court and Pinsent Masons.
There is ongoing debate about whether there will be continued demand for big city centre offices given changes in working practices.
I feel that for the foreseeable future, there will always be organisations that will need office space for clients, as well as to bring staff together.
However, we could see this space reduce in size with the increasing prevalence of hot desking/agile working.
On the flip side of this, you could also argue that such agile working practices could lead to more space requirement as demand for more breakout areas and collaborative working spaces increases.
Around 21% of the lettings over the last year have been into serviced space and these are typically on longer agreements of one, two or up to three years.
We have seen a huge influx of serviced office/collaborative workspace operators into the city and I think occupier demand for this type of space will continue to increase.
With a strong market, comes even stronger rents, however, so businesses may find that upon lease renewal they are faced with rental uplifts, as well as the prospect of rising business rates costs ahead of the 2021 Revaluation.
To address this, it is important to ensure that you budget for potential increases, and seek professional advice to mitigate these costs wherever possible.
If you are looking for your next property opportunity, would like help with your next lease event, or need advice on your business rates liabilities, don’t hesitate to get in touch.