Birmingham's Real Estate Economy: Moving Fast In The Right Direction?
Birmingham is riding high: confidence in the city-region economy has been boosted by the relocation of HSBC and Deutsche Bank; the 2022 Commonwealth Games; and the dawning reality that HS2 really will roll into Curzon Street in 2026.
But what must Mayor Andy Street and local councils do to make sure the economy — and the property market — grab the opportunity? Bisnow asked two of the city's sharpest minds to give Street a word of advice. Transport is critical, but the commercial property industry also needs to play a vital role.
HSBC is due to open its new 210K SF Centenary Square HQ in just four weeks: It is a powerful reminder of the Birmingham city-region's appeal.
The bank opens its doors as confidence rides high thanks to the award of the Commonwealth Games 2022 and a series of policy wins and spending committments that seem to show the region's needs have been recognised.
Yet there is no room for complacency: compare economic growth in the West Midlands to the European average and it is clear the region has not kept pace. According to Eurostat figures, in 2001, gross domestic product per capita in the region was 1% above the European average, today it is 14% below. Sandwell, Dudley and Wolverhampton fell behind at an even faster rate than the region as a whole.
Last week's announcement that JLR was to shed 1,000 agency jobs in Solihull dramatise the problems diesel car making will face in an increasingly anti-diesel age. If JLR suffers, the engine in the West Midlands regional economy could splutter.
It's All About Transport
GVA Senior Director Charles Toogood has no doubt what is needed to make sure Birmingham continues to appeal to new occupiers and investors: investment in transport.
Whilst praising the £250M investment in Midlands Metro extensions and the £1B pledged to improve rail and other transport services, Toogood said Street must make transport one of his two top priorities.
"We have seen more investment in West Midlands transport in the last five years than we saw in the last 25, and a great deal more than has gone into many other European cities. But we were lagging behind and we still need Metro extensions to Eastside and the forthcoming HS2 station in the Curzon Street area.
"Good transport links will be fundamental to the economic health of those areas, which is where we will see much of the next generation of development," Toogood said.
He added that resolving the West Midlands' skills problem will also be vital. "I'm not sure what powers Andy has that can deal with this, but the problem of a poorly skilled workforce is the most important for repositioning Birmingham," he said.
The Right Mix Of Space
Legal & General Property Head of Business Space Development Simon Wilkes said that improving transport links within the West Midlands will make the most of the benefits of the HS2 rail link, due to arrive at the new Curzon Street station in just eight years time.
"I was speaking to one of our major corporate tenants in London, and they told me opening an office in Manchester was not likely — the journey was too long — but Birmingham will be less than an hour from London with HS2," Wilkes said. "With lower property costs and a different talent pool for them to recruit from, they say Birmingham makes a compelling case for a relocation. Improved local transport will reinforce that connection with London."
However, getting the transport right is not much use if there are no suitable buildings for relocators to move into — and this is where both Wilkes and Toogood see a need for change.
Both praise the large-floorplate developments now dominating the city: Hermes/Argent's Paradise and M&G/Ballymore's Snowhill. However, both think a wider range of smaller (maybe cheaper) floorspace is essential.
"I'm not sure floorspace needs to be much cheaper — look at London, tech firms are taking floorspace at roughly the same rents as everyone else — but we do need a greater range of office stock in Birmingham, stretching from the premium professional floorspace, through corporate, to stripped-back urban. We need floorspace that can adapt to the more informal ways of working occupiers now prefer," Wilkes said, referring to the 113K SF Lewis Building recently refurbished by LGIM.
The Risk Of Crowding Out Smaller Office Users
GVA's Toogood takes the argument a stage further. "Birmingham has a lot of nice shiney premium office space, but we also need the less expensive modern stock because not everyone wants the prime-prime required by professionals or by the financial services sector. So that means 50-60K SF blocks in a city now seeing mostly 150-400K SF blocks under construction," he said.
Toogood describes his ideal office as "discounted premium", perhaps low-rise, perhaps in one of the hotly tipped city areas like Digbeth and Curzon Street. "Birmingham needs smaller blocks, good quality but less expensive, with smaller floorplates for 20- [to] 30-employee businesses," he said.
Does that mean protecting areas like Curzon Street and Digbeth from larger developments, using planning powers to restrict the size and nature of office schemes? Toogood is cautiously in favour of looking at that kind of solution; Wilkes definitely is not.
"If London can manage to provide new build and refurbished space for different kinds of business, so can Birmingham. If the market is there, developers will deliver," Wilkes said.
Birmingham's economy is moving fast — but if it cannot secure floorspace for growing businesses, it could be moving in the wrong direction.