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News Release


Corporate inertia is the biggest challenge facing the Birmingham office leasing market

According to Jones Lang LaSalle’s latest Birmingham Offices Research Report

Birmingham, 29th July 2009 – Corporate inertia will present the biggest challenge to Birmingham’s office leasing market over the next twelve months according to Jones Lang LaSalle’s Birmingham Offices Update - Quarter 2 2009 research report.

Occupier demand for office space continued to be subdued during Quarter 2 and any requirements that are in the market are taking longer to be satisfied as occupiers, seeking to avoid the capital expenditure associated with a move, defer property decisions.  Whilst office viewings remained low, Jones Lang LaSalle did however record an increase in activity towards the end of the second quarter with viewings more than doubling in June, in comparison with April and May.

Jonathan Fear, head of Jones Lang LaSalle’s National Office Agency team in Birmingham, said: “Despite cuts in prime rents occupiers are looking towards cheaper space to fulfil their property requirements, with interest focussed on Grade B accommodation as cost saving remains high on the corporate agenda.  With the continued uncertainty in the economy occupiers remain slower to commit to office space and this will keep take-up volumes subdued and supply inflated.”

Take-up volumes fell in Quarter 2 in comparison to the previous quarter, down 22%, although the actual number of deals that transacted increased.  Market activity predominately sat in the sub-5,000 sq ft bracket, with 66% of deals below this threshold - only one transaction over 10,000 sq ft completed. Over the year to date 195,440 sq ft has been let reflecting a drop of 66% in comparison with the equivalent point last year.

Jones Lang LaSalle’s latest research report shows that for the second consecutive quarter space being returned to the market outweighed take-up, resulting in a fall in the volume of occupied stock.  Over the last six months, the net absorption of space has been -132,720 sq ft.

Jonathan Fear added: “The first half of the year has seen a significant fall in take-up activity in comparison with last years record levels. Vacancy rates have increased to over 15%, well above the five-year average of 10.3% which will continue to put increasing pressure on landlords to cut rents and increase incentives in order to attract tenants. We anticipate that demand and, therefore, take-up volumes will remain low over the remainder of the year with a total take-up of less than 450,000 sq ft, compared to the ten year average of 610,000 sq ft.”

Jonathan Fear continued: “Tenants that are in a position to take space will be able to take advantage of the market conditions to secure highly competitive terms on certain buildings. With declining speculative activity, however, Grade A supply will begin tighten from 2011 and occupiers will have to make decisions soon to avoid missing this window of opportunity.”

Birmingham’s office investment market remained quiet throughout most of Quarter 2, due to the continued lack of stock coming onto the market. There was an upturn in activity in June, however as two significant buildings, 7, 8 & 10 Brindley place and 55 Colmore Row were placed on the market. Investor interest in both these buildings has been robust.

Ed Gamble, head of Jones Lang LaSalle’s National Investment team in Birmingham, said: “The interest in these two buildings suggests a renewed weight of demand for prime city office buildings. Demand from overseas and equity purchasers has hardened as the value of sterling remains weakened with a low Bank of England base rate, resulting in even lower cash returns than during 2008.”

Ed Gamble concluded: “In addition, there has been a reversal of the outflows from UK retail funds to positive inflows. Consequently, we believe prime yields for well located offices with 10-years plus unexpired lease terms have moved in from 7.25% to 7.00%.”