Has Boris' Unlockdown Plan Kick-Started Birmingham's Office Market?
It is a coincidence that the week Boris Johnson, the prime minister, announced a timetable for ending the coronavirus lockdown also saw insurance giant AXA sign up for 14.2K SF at Ediston’s 102K SF St. Philips Point office building in central Birmingham.
Even so, the AXA deal, a long time in the making, symbolised a real corner-turning moment as agents and developers report an appreciable post-Boris boost in the volume of smaller office requirements.
Johnson announced on Monday that the presumption in favour of working from home would end some time after 17 May. According to many in the Birmingham office market the 'return to work' signal gave many potential occupiers with requirements under 10K SF just the push they needed to turn speculative enquiries into something much firmer. Activity below 1K SF is said to have bounced back with even greater strength.
The apparent surge in demand comes after a fortnight during which rising anticipation of the prime minister’s announcement helped to reawaken dormant and slow-moving office requirements.
Sterling is behind the only central Birmingham office scheme likely to complete this year, the 224K SF tower at 103 Colmore Row.
“Requirements that had been delayed or on hold seem to be live again, and that has a lot to do with corporate-driven rethinks of working from home," Howarth said. "The big occupiers are trying to work out how much space they will need, and it seems the conclusion they are drawing is that it is probably more than we expected at the lowest point of expectations last year.
“We will still see a de-densification of office space, but we probably won’t have the cliff edge of requirements dropping away everyone was talking about in lockdown one.
“But the fact is, everyone in property is now fatigued by Zoom and the online stuff and wants to get back to the office, and I expect that’s true of occupiers too.”
“Since the turn of the year there has been more optimism, and it's too soon to say that Monday’s announcement was a catalyst, but it is definitely true that the last week or two in anticipation of that announcement saw a re-emergence of the sub-10K SF requirements. They have now rejoined a market dominated by the larger slow moving requirements which never went away,” Ventham said.
Cushman & Wakefield Birmingham office agency partner Scott Rutherford said Birmingham’s biggest office schemes are experiencing renewed interest, the first serious change of mood since the pandemic began.
“The last week has seen the highest level of new enquiries since the first lockdown, and we’re also seeing old requirements being revisited, and some restarted. Occupiers see the direction of travel for overcoming the pandemic as positive,” Rutherford said.
“The requirements we’re seeing show perhaps 20% less floorspace required than might have been expected before the pandemic, but occupiers are showing a wariness about that. I don’t think anyone really knows what they will need for the future, which gives the flexible and serviced sector an opportunity.”
“If there’s been a surge in serviced and flexible office requirements, then that comes off a low base.”
The market for super-small suites appears to be particularly busy after a long fallow period.
"We've seen a definite increase in enquiries in the fortnight prior to the prime minister's roadmap announcement, as businesses started to anticipate an easing of restrictions,” Hortons’ Estates Management Surveyor Nina Meeks said.
“We've particularly noticed this in those in the market for offices of about 1K SF. After a challenging few months for the commercial property sector, this is a welcome and positive sign that there is now more business confidence."
The AXA deal at St. Philips Point follows a £1M first-floor refurbishment.
“AXA undertook a review of their property requirements last year," Savills Director Ben Thacker said. "A number of alternatives were considered but the business opted to remain at St. Philips Point, surrendering part of their space on the upper floors and consolidating occupation into a large single floorplate on the first floor.
“The 14K SF suite will supplement the accommodation AXA retains on the fifth and eighth floors, with AXA now occupying 28K SF.
“The prime central location, contemporary grade-A specification and the landlord’s willingness to work with AXA to offer the flexibility they required to restructure their existing leases and move them to more efficient space within the building swung the deal.”
Lambert Smith Hampton advised AXA.