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Birmingham workspace: Road to nowhere turns into road to somewhere

The Birmingham workspace market is lifting itself up off the canvas as big relocations improve the mood. But there are still questions to answer, and growing demand for quality refurbished floorspace.

28/07/2021 6 min read
Plans for Paradise Circus, Birmingham

Words: David Thame

The news that Goldman Sachs was to bring a 50,000 sq ft office requirement to central Birmingham, and that the Department of Transport would be following them, came at just the right time.

Back in April, when Goldman Sachs and the ministry both revealed their plans, things couldn’t have looked frostier in the Birmingham office market. To say the market was ‘flat’ scarcely does justice to the horror story that unfolded during 2020 and early 2021.

Yes, blame the pandemic – every city had its problems in 2020 – but Birmingham had it worse, thanks to a market now heavily tipped towards Grade A office space (with more to come). Bad timing and over- confidence in big floorplate corporate blocks meant a pandemic price had to be paid. To coin a phrase, Birmingham office take-up didn’t just fall off a cliff; the city dug a huge hole, put weights in its pockets, and jumped right into it. In the Q2 to Q4 period, the city scored just 181,000 sq ft of deals (Manchester managed four times as much).

Today the mood is brighter. Chatter about locations for incoming civil servants and bankers is brightening the atmosphere, and a series of small but welcome deals in prime floorspace is gradually eating into the standing stock (and therefore improving the chances of new developments due to be delivered soon).

The market has been kept afloat by smaller transactions from the kind of firms who are not in thrall to global corporate strategies, nor trapped in the iron-grip of risk-averse HR departments. A letting to Clarke Willmott at 9 Colmore Row is a typical example. Its relocation from elsewhere in the city sees the law firm take 4,200 sq ft on a 10-year lease in a deal with UK Commercial Property REIT, a portfolio managed and advised by Aberdeen Standard Investments.

The 69,000 sq ft 9 Colmore Row block has the kind of moderate-sized floorplates that appeal to this kind of corporate demographic. Buildings like this have done well when the big floorplate blocks have suffered: three of the other tenants have renewed leases, comprising over 18,000 sq ft, in the last couple of months.

UKCM recently completed an upgrade programme at the property, which saw the reception area refurbished, the addition of a communal meeting room and breakout space, and the delivery of a dedicated cycling hub and health club with quality changing facilities in the basement.

Good quality, second-hand refurbishments with decent but not huge floorplates and a landlord prepared to bend with the wind: if you have to identify the recipe for success in Birmingham offices – that would be it.

Look, for instance, at another Aberdeen Standard block at 54 Hagley Road, where a £3 million refurbishment has meant new ground floor amenities, including a business lounge and café, breakout spaces, conference rooms and fitness studio with shower facilities.

Despite the COVID-19 pandemic, Aberdeen Standard Investments, which acquired the Grade A office building just over two years ago, pressed on with its plans to create offices that were fit for 21st century businesses seeking high quality space. Turns out to have been a good move.

‘The plan was always to create the best office building in Edgbaston and thanks to our long- term approach to investment, we believe we have created that,’ says Cameron Mackay, Senior Asset Manager at Aberdeen Standard Investment.

The amenity offer and some of the vacant offices have been modernised as part of a long- term investment strategy by Aberdeen Standard Investments, while a full fit-out is underway on floors nine and 14, which will provide a fully fitted solution to incoming tenants, enabling them to ‘plug and play’.

‘This is not just a standard office offering: there is full flexibility, with different routes and favourable lease arrangements that will suit ambitious businesses that want a prime Birmingham address and space to grow,’ he says. The landlord is angling for requirements from a tiny 1,850 sq ft to mighty 44,000 sq ft – and this is the kind of flexibility that will pay off.

The building also lies outside the new Birmingham Clean Air Zone (CAZ), which came into force at the start of June.

What all this adds up to is a holding-the- breath moment for the Birmingham office market as everyone waits to see what effect the charge, unlocking the economy and the arrival of a big slug of new speculative office floorspace has on rents and take-up.

Danny Parmar is Regional Chair of the British Council for Offices in the Midlands and a Director at Overbury. He says the city is already bouncing back, but adds (more controversially) that the big floorplate blocks now reaching the lettings market still have a firm future. COVID has not dented their appeal.

‘Yes, they are holding their breath but that is a short-term problem,’ Danny says. ‘A year ago, people were saying the office is dead…then it was talk of a new hybrid way of working and the office has to be a lot smarter to get staff back. I think the place we’re at today is that offices are here to stay but that it won’t be banks of desks in open plan spaces. It is going to be collaborative, and about socialising and mentoring – all things you can’t do from home.’

This sounds good unless you own the kind of office space designed for huge prairies of desks in open plan spaces – and most of the new speculative stock in Birmingham was.

‘There’s been demand, I totally disagree,’ says Danny, pointing to the BT deal at Three Snowhill and the fact that only two floors are left at Two Chamberlain Square. The remaining new block, 103 Colmore Row, has smaller floorplates anyway. ‘Occupiers are coming back into the market and starting to make decisions, although they are probably talking about taking less floorspace than they would have done before the pandemic. We reckon it is about 30% less floorspace due to new ways of working. But, even so, deals are coming,’ Danny reasons.

Birmingham’s generally vanilla traditional office stock (see the Mix Roundtable with Wilmott Dixon Interiors) does not help excite occupiers, and Danny confesses the city needs to improve its design game.

‘There’s some truth in the complaint about office stock being bland. New blocks are built for middle of the road occupiers. They are a blank canvas.

‘Of course, if you are trying to attract media or tech occupiers, then you would create something different, although I suspect those occupiers wouldn’t be looking at the city core and would go instead to Digbeth.

‘It’s not that Birmingham has the wrong stuff on offer, and it is not the case that the big new speculative blocks will be white elephants. Demand is out there. Think of the Department of Transport – they will have to go somewhere.’

Heart is taken from the decision of some occupiers to increase, rather than shrink, their Birmingham core floorspace.

Scott Rutherford, Partner at Cushman & Wakefield, is one of those responsible for persuading occupiers to return to city centre office blocks. After a few days resuming his 40-mile round trip commute, he can well understand why some are reluctant to resume old habits.

‘You begin to see why people don’t what to do this,’ he says, reflecting on the journey. ‘The truth is that we don’t know how office occupancy will go, but we are starting to see decisions about occupancy – and, interestingly, people are concerned that they aren’t taking enough space. They are finishing staff consultations on hybrid working, and they think this change is what they need.’

Does the sense of uncertainty extend to the future, or otherwise, for Birmingham’s big floorplate offices? Scott thinks there will have to be some design rethinks, but does not think their time has passed. ‘We will need things like Zoom rooms, so you can go and do an online meeting without background noise or clients overhearing everything your colleagues are saying,’ he says.

Scott’s guess is that the appeal of the office will gradually re-assert itself, particularly for occupiers with demanding environmental and sustainability objectives.

Deals will soon prove his point, with rumours of a signing at Tristan/Sterling’s 103 Colmore Row. In addition, Goldman Sachs are said to be looking closely at the block.

Once the current developments at Colmore Row, Paradise Circus and Arena Central are completed, there will be no more new stock available until late 2022, by which time – everyone hopes – the office market will be back on its feet.

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