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2019: The Year When Birmingham's City Living Scene Goes Through The Roof

Will 2019 be the year the slow-burn Birmingham city living market flares into city-changing life?

As Galliard and partners Apsley House launch their £165M Soho Wharf scheme, Deloitte publishes new figures showing city centre residential development reaching an all-time high with more than 5,000 units under construction.

Will the pace be maintained? Bisnow takes a look at the evidence.

Galliard/Apsley House's Soho Loop, as it will look

Birmingham's city-centre residential market is ballooning: more schemes, bigger schemes, and bags more confidence.

This week Galliard Homes and Apsley House Capital take the wraps off their 750-unit Soho Loop site, part of the Greater Icknield Masterplan on the western fringe of the city's Jewellery Quarter.

The £165M development is one of the largest yet, but it is far from alone. New data from Deloitte Real Estate shows that during 2018 Birmingham saw 13 major new residential schemes, taking the total to 20. Performance in 2018 easily surpassed that of 2017 taking construction to record-breaking levels. Deloitte's Crane Surveys shows 5,065 units currently under construction, up almost 25% on the previous year’s figure.

A total of 1,696 units were completed in 2018 and delivery will rise to an anticipated 2,924 units in 2019, more than the combined total for the last five years. The scale of the change is breathtaking when compared to the average annual completion rate of 555 units in the decade between 2008 and 2018.

Galliard and Apsley House will be comforted that the Deloitte data shows they are building in the right part of town: the Jewellery Quarter is a a focus residential development, with five new starts in 2018 and a total of 1,268 units currently under construction.

“Residential development is on the rise and with it a renewed confidence in the city as business and investors look to relocate and invest in the city centre,” Deloitte Real Estate partner Edwin Bray said.

“The residential sector is responding to demand for city-centre living and developers remain keen to secure key strategic sites as the competition for new entrants intensifies."

The Westside quarter of the city remains popular with nine schemes under construction including Moda Living’s £183M build-to-rent scheme, which is set to become Birmingham’s tallest residential tower, rising to 42 storeys.

Residential is the obvious star performer, but the Deloitte surveys reveals that it is not alone, with three other trends to watch.

Birmingham, seen from the Soho Loop site

1. Student Housing Peaks?

With the exception of 2014/15, student housing has been a steady performer in the central Birmingham property market. However, this year's data might be pointing to a sector that has climbed steadily and may now be reaching its peak.

Deloitte said that a total of 2,667 student bedspaces are currently under construction and 2018 saw 1,262 new bedspaces delivered. Delivery rates are expected to be similar in 2019, with 1,209 further beds due to be completed, increasing to 1,458 in 2020. The scale of the growth is significant compared to the annual average of 627 bedspaces completed in the decade 2008-2018.

"There is scope for more student housing, and space for more, but whether the demand is there I'm not convinced. I would be surprised if we saw much more," Bray told Bisnow.

 2. Office Market: You Are All Looking At The Wrong Numbers.

The volume of new office space under construction has remained fairly constant at around 1.3M SF for the last four years. However, the accident of fate and property market timing means 2019 will see a huge surge in completions. A completion rate of around 250K SF suddenly surges to more than 800K SF.

Of the total office space under construction, approximately 33% is pre-let, down from 49% in 2017, suggesting there is short-term caution in the occupier market.

Yet according to Bray, the metric you ought to be watching is not starts or completions, but Birmingham's skills levels and graduate retention rate. He argued these will define the city's office scene in the next few years.

"The issues that matter are less to do with what gets built but around talent retention and attraction. This is all about skilled labour," he said.

3. Hotels Are Back. Maybe.

There was just one new start in the hotel sector in 2018, providing just 93 rooms,  and no completions of new developments. But reports of the sector's death are greatly exaggerated. 

2019 is expected to be strong, with the highest number of beds added in the city since 2013. Unite’s hotel-led mixed-use scheme is set to complete early Q1 2019, offering 170 rooms alongside new conference and office space. The flagship completion for 2019 is set to be the prestigious Grand Hotel, which will provide 180 rooms. A total of 443 rooms are under construction.