An overview of the commercial property market in Birmingham

During the four years leading to 2012, the commercial property market in Birmingham experienced a series of zigzag trends. Following the boom that characterised the years previous to the financial crisis, the volume of property transactions fell by more than 66 per cent in 2008. During the following year, the local commercial property market seemed to experience growth, but growth levels have stagnated and since 2010 there are signs of a moderate recovery in the Birmingham market.

Market analysts at Property Data UK predict that despite the current slow growth rate, the Birmingham commercial property market will outperform the rest of the UK within the next 4 to 5 years, particularly in terms of retail and office space.

The most in-demand areas are concentrated in and around the city centre and include developments like:

The Cube - This is one of the latest developments in Birmingham and a highly sought-after location for office and retail space. The Cube has more than 110,000 square feet of dedicated commercial floor space.

Martineau Place - A shopping centre featuring almost 300,000 square feet of retail space and 77,000 square feet of office space in the heart of Birmingham.

The Bullring - Since its completion in 2003, the Bullring has been one of Birmingham's leading shopping locations with more than 1.2 million square feet of retail space.

New Street - This busy city centre road has undergone redevelopment and is now occupied by large department stores and retail units. Further developments are expected to be completed by 2014.

Colmore Business District - This area offers 203,000 square feet of office space in one of Birmingham's most desirable business locations.

Eastside - Previously an industrial area, Eastside is set to become a successful example of urban regeneration and a key centre for retail and mixed-use property.

Office space in Birmingham

Birmingham's total office floor space exceeds 17 million square feet, and approximately 53 per cent of this space is Grade A space. Grade A office space availability decreased from 1.5 million square feet towards the end of 2009 to just under 1 million square feet at the end of 2011.

Take-up rates in Birmingham's city centre totalled almost 230,000 square feet in 2010 and increased by an encouraging 307,000 square feet by the end of 2011. This was mainly due to the £260 million investment that resulted from a series of high profile transactions for office properties in Birmingham's city centre.

Office annual rental growth rates reach 3.1 per cent and could even be higher as the city continues to expand its financial and business services base. According to a report published by Oxford Economics, the growth of the private sector could translate into a 12 per cent increase in the demand for office space between 2012 and 2016. This could help reduce further the current office space vacancy rate of 14.7 per cent.

Office rent prices in Birmingham are in the region of £28 per square foot. Prime yield rates currently stand at 6 per cent. On average, office space in Birmingham is 50 per cent cheaper than in London, which contributes to making this city a very attractive location given its successful business profile.

The supply-demand ratio for this kind of office space in Birmingham is currently fixed at 3.3 per cent, a figure that positions Birmingham among the top 3 strongest office property markets in the United Kingdom outside London. Although currently Birmingham experiences an oversupply of office space, researchers at GVA estimate that low completion rates will reverse this trend by 2013, when a shortage of prime office space could emerge.

Retail space in Birmingham

Weak consumer spending and the increase in the popularity of e-commerce have meant that retail office space in many high streets around the country has been negatively affected. This is also the case of Birmingham, as vacancy rates in retail properties have almost doubled over the past five years.

Approximately 83 per cent of the total retail floor space in Birmingham is taken up by occupiers who require 100,000 square feet and over. Retail annual rental growth rates 0.7 per cent, and as of September 2011, average retail rents in the city stood at £139.60 per square foot, with some properties in Zone A fetching up to £290 per square foot. In 2011, the average rental cost of a standard shop unit was £3,300.

Industrial space in Birmingham

Industrial annual rental growth rates in Birmingham stand at 1.2 per cent, a figure that is on a par with the rest of the United Kingdom. However, relatively high take-up rates (which currently stand at 1.73 million square feet per year) and lack of funding for new developments could mean that the industrial property market in Birmingham could experience severe shortages from 2013 onwards.

Currently, industrial property prices range from £3.50 to £5.50 per square foot, with the latter price belonging to prime rental costs.