This blog post has been produced for the Greater Birmingham Chambers of Commerce to provide industry insight on the findings of the Birmingham Economic Review.
The Birmingham Economic Review 2017 is produced by the University of Birmingham’s City-REDI and the Greater Birmingham Chambers of Commerce, with contributions from the West Midlands Growth Company. It is an in-depth exploration of the economy of England’s second city and is a high quality resource for organisations seeking to understand Birmingham to inform research, policy or investment decisions.
Economic growth in Birmingham is expected to continue at an average rate of 1.8% over the next five years, broadly in line with the national average. A combination of sectors will underpin this growth, with accommodation, food services & recreation, wholesale & retail and construction sectors likely to outperform other sectors.
Population growth forecast is strong in Birmingham with an average growth of 0.75% pa over the next five years, well above the UK average. The growth has largely been driven by an increasing working age population, as the city sees an improvement in its skilled labour and student retention rate.
Regional improvements in infrastructure have attracted an increasing number of businesses to set up or relocate to the West Midlands, particularly larger and higher quality employers. Birmingham has been the largest winner with banking giants such as HSBC and Deutsche Bank as well as HS2 relocating offices from London over the last five years. This trend is continuing, the latest example being the prospect of Channel 4’s relocation to the region.
Birmingham is amongst the most important office markets in the UK, with prime headline rents now reaching £32 psf. The second half of 2017 is expected to have stronger activity than H1, headlined by the 240,000 sq ft Government Property Unit deal, alongside a handful of significant transactions, such as engineering company WSP, RICS (relocation from Coventry) and the latest serviced office deal to Regus. There is currently around 285,000 sq ft of grade A space immediately available in Birmingham city centre, which equates to only a year’s supply based on the ten year average grade A city centre take-up of 293,000 sq ft. There is also a further 600,000 sq ft (2 years’ supply) of speculative space under construction at 3 Snowhill, Chamberlain Square and the comprehensive refurbishments at Cornerblock and The Lewis Building.
Birmingham remains a sought-after location for the industrial sector and a large number of enquiries are specific to the wider Birmingham area. Annual industrial rental growth was at 4.3% in the year to June, compared to 2.7% in the previous year.
Birmingham remains a sought-after location for the industrial sector and a large number of enquiries are specific to the wider Birmingham area. Occupiers are becoming more focussed on ‘sustainable’ facilities to maximise efficiency and maintain their corporate image, particularly national companies. Due to these pressures, occupiers are seeking to trade up from secondary space on lease expiry. Argos recently took a 69,300 sq ft energy saving logistics building in Witton for last mile internet delivery services, reflecting the growing appetite for sustainable facilities.
The most significant industrial and logistics development opportunity in recent years is now available at Peddimore, Birmingham. It has the potential of creating 3 million sq ft of warehousing and industrial space and up to 10,000 jobs adjacent to a new settlement of up to 6,000 homes and associated infrastructure at Langley.
Retailers are continuing to demand newer, modern stores which fit brand images, but often cannot be accommodated in many smaller towns without significant redevelopment of the existing stock. As a result, demand for retail is thereby strong in Birmingham where there are opportunities to strategically place flagship stores in new developments such as the Grand Central. The former Pavilions shopping centre will be converted into a 150,000 sq ft Primark, one of the largest in the UK.
Industrial rental growth is forecast to outperform both office and retail markets in Birmingham. We expect average industrial rental growth for Birmingham, at 3% pa over the next five years well above the office market and retail market forecast of 1.7% and 0.8% respectively.