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hese are interesting times in But he believes there’s enough space at the
T
the commercial property moment to last two or three years, so we’re
market. Rents are still falling, not going to see an immediate recovery.
and banks aren’t lending, but This is a bit different from the historic
valuations seem to have pattern. Over the past 25 years,
stabilised and stock market Birmingham hasn’t had a constant supply
investors are actually interested in the of Grade A offices coming through, so that
market again. But a lot of the reporting, every time there is a boom, it results in a
inevitably, focuses on London. What’s shortage of space and a big increase in
happening elsewhere? rents. Birmingham office rents are the
In Birmingham, Jan Thompson, head of highest outside London and saw another The seeds of the
the Jones Lang Lasalle Birmingham office, boost early in this decade.
says all markets have slowed – industrial “But now,” says Thompson, “you have a next boom are
and retail as well as office. good selection of buildings being made
Birmingham has seen some major available just as demand tails off. So deals already being
investment in recent years, particularly in are going to have to get more attractive to
the retail market, “Birmingham has made tenants.” That may be through lower rents, sown - so it will
great strides to come up the retail league or it may also be through higher incentives.
table with the development of the Bullring, be back to normal,
but the next two developments are on the BIG NAMES BUT NO NEW BUILD
back burner.” No-one is building new. Over a million square feet is currently boom and bust.’
The same is going to happen in the office being made available; Thompson mentions
sector. There are still a few office Colmore Plaza, by Carlyle Group, “which JAN THOMSON,
developments being finished off, but he has twelve storeys and so far they’ve only JONES LANG LASALLE BIRMINGHAM OFFICE
thinks once they are finished, there will be
no more speculative developments. Not let one floor”. Other developments are also
only is it next to impossible to secure failing to fill. Baskerville House, in the old
funding, but the economics don’t work. Civic Centre, is about 40 per cent let;
“Construction costs haven’t come down, meanwhile the first building on Ballymore’s
but rents and values have,” he says, and it’s Snow Hill development has been 60 per
difficult to attract tenants. cent let to KPMG and Barclays, but
Of course the silver lining is that office construction has been halted on the
stock, which has been expanding over the second phase, which was pre-let to Wragge
last few years, will start declining again. & Co solicitors.
Thompson says, “That means the seeds of Thompson says, “That is quite a lot of
the next boom are already being sown – so Above: Colmore Plaza – only one floor let stock considering that the normal take-up
it will be back to normal, boom and bust.” Below: Snow Hill – 60 per cent let in the Birmingham market is round about
the half a million mark.” And right now,
there is relatively little private sector
demand – most take-up is coming from
the public sector.
Rents are likely to fall. They reached £33
a square foot at the peak and though
Thompson thinks landlords will still be
looking for £30 plus, he says, “If I were
looking I’d look for less and perhaps a three
year rent free period too.” He usually
represents the occupier – so Birmingham
developers beware!
He admits that it is difficult to say exactly
what level rents have reached, since “we
haven’t seen a market-revealing deal yet.”
The last, the Highways Agency letting at
The Cube, was rumoured to have made
£25 a foot, but Thompson points out that
it’s not in the heart of the business district.
However what is clear is that the market
is polarising, with an increasing gap
between prime space and the rest. While
central Birmingham rents are over £30 a
square foot, smaller offices in Edgbaston
PROPERTYdrum JUNE 2009 71
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