Birmingham property predictions in 2017
Undeniably, the Birmingham of today is unrecognisable from the city of 30 years ago. This transformation, however, is work in progress. Large scale regeneration and new development continues at pace, opening up new areas and changing the very fabric of the city.
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Commercial:
Rental Growth
Birmingham has undergone a seismic change over the last 5 years with high quality infrastructure and development planning unshackling the CBD and generating traction for the evolution of the core office market.
The regeneration programme is continuing supporting a current office development pipeline of 1.7m sq ft, the largest on record. This delivery of high quality, modern office stock to the city is already serving to attract new business to Birmingham including the relocation of core functions from HSBC and Deutsche Bank.
The offer of Birmingham is changing quickly and for the better. With this in mind, we anticipate that prime rents in the city core will reach £35.00 per sq ft by the end of 2018.
Occupier Trends
The need to attract and retain talent has led to a rise in ‘footloose’ occupiers and we anticipate this trend will support demand growth in central Birmingham.
Importantly, Birmingham is attracting the growth sectors such as Technology, Media and Telecoms (TMT) with this group representing 20% of deals completed so far in 2016.
This percentage we expect to rise with FinTech, Media and Biomedical occupiers predicted to feature strongly as the city’s reputation grows both regionally and internationally.
This rise will compliment demand from the professional services and financial occupiers, Birmingham’s mainstay, who continue to target prime areas.
Rents in the city core will reach £35.00 per sq ft by the end of 2018.
Investment
With market sentiment wavering in both the run up and following the result of the EU referendum, it is unsurprising that deal numbers in 2016 have suffered.
We should remember that this dip in activity is from a very high base. Total office investment in 2015 was the highest on record for Birmingham. Importantly, The principal driver that led to this record year has not changed; the strength of the occupier market.
We anticipate that the appetite for quality stock will remain robust and as such, pricing will stay keen. Yields for prime products we expect to stay around 5.25%.
A significant amount of equity, particularly overseas money, continues to target opportunities in Birmingham. The low value of sterling should serve to bolster this although the level of deliverable quality stock may restrict transaction numbers.
Residential:
Design requirement rise
Buyers’ expectations have increased significantly in the last year or two. With more buyers relocating to Birmingham from London, where design specifications are generally high, similar requirements are now moving into the Birmingham market.
Buyers are looking for apartments and developments of a better quality than ever before, effectively shifting the emphasis from price to quality and environment.
We would expect this to move on again with a number of the larger mixed-use schemes that are in the pipeline having a heavy residential mix, developers will need to meet the challenge of creating a built environment that caters for both commercial and residential uses.
The supply of homes in the emerging build-to-rent sector will average 55 units a year in the city centre by 2020
Birmingham is one of the key regional cities where rents and values are at a level which make Build-to-Rent an attractive option.
The focus on Birmingham from institutions is set to intensify with the city being recognised as the youngest in Europe, home to approximately 1,900 international companies and the largest professional Services Sector outside of the capital offering a diverse tenant pool from which occupiers can be attracted.
With continued pressure on housing supply in to the Birmingham market the private rental sector will have a key role to play in the dynamics of the city’s residential offering over the next five years and beyond.
Find out more about Build-to-Rent in Birmingham
Prime values will hit £500 per ft by 2020
The foundations of the city centre market will be underpinned by transport infrastructure projects, major mixed use schemes and continued demand for housing as the city continues to attract those relocating from London, the South East and further afield via the city’s flourishing commercial property market and education offering.
As a result, pricing at some top-end schemes could reach £500 per sq/ft in prime locations driven by a balanced approach to well-proportioned living space, specification and built environment.
Find out more about investing in commercial or residential property in Birmingham