Birmingham in global Top 50 for prime office occupation costs

Birmingham has emerged as one of the world’s Top 50 most expensive office markets.

According to new research by property consultancy CB Richard Ellis, the cost (including rent, rates and service charges) of occupying prime space in the city is £43.99 per sq ft, though still around a third of the cost of London. 

At 28th position in the global rankings, Birmingham is neatly sandwiched between regional rivals Manchester and Leeds. Occupying equivalent space in those northern cities comes in at £44.49 and £42.50, placing them 27th and 29th in the global rankings.

Tokyo leads the board, supplanting London’s West End, at £128.17 per sq ft compared to the UK’s capital city, where costs of £120.49 are reported.

Despite the high ticket prices at the top of the table, CBRE’s research, which tracks 170 cities across the world, reports an overall trend of falling occupation costs. The global credit crunch is taking its toll and even the most expensive office markets are considerably less expensive than they were six months ago.

Thirty four cities – including Birmingham – have seen double digit falls in occupancy costs year-on-year. A fall of 12.5 per cent was recorded in Birmingham. Manchester and Leeds were both climbers, however, adding 1.1 per cent and 10.4 per cent respectively to their costs.

Across Europe take-up has generally been weak, with London and Madrid in particular experiencing slow starts to 2009 due to leasing activity being substantially below historic levels. Even in markets which fared relatively better, such as Paris and Frankfurt, take-up was boosted by a small number of isolated large deals, with core underlying demand down. Vacancy rates are also rising, due to weaker demand and also because of the significant amount of sublet space being offered to the market.

CBRE Birmingham’s head of office agency, Ashley Hancox, welcomed the city’s continuing inclusion in the global Top 50 as “a badge of honour”.

He said: “The global rankings are a useful benchmark but when it comes to the national office market the performance of our regional rivals is more telling.

“In the last six months we have seen a recalibration of office occupation costs in Birmingham, Manchester and Leeds. The result is that these office locations are now separated by a gnat’s hair.

“The message to landlords in Birmingham seeking to attract occupiers is not to concentrate on costs only. This is only one consideration, and not always an occupier’s main one. The city must look at other differentiators, such as the quality of space on offer, the availability and cost of labour, graduate retention, amenities and quality of life.”

Mr Hancox attributes Birmingham’s 12.9 per cent fall in headline costs to the handful of historic £30+ deals the city scored in 2007 and 2008, which ‘spiked’ prime rents upwards.

He said: “Whilst there have been too few transactions to produce sustainable evidence the consensus is that we expect prime rents to settle around the late £20s. This makes us more competitive with other regional centres. It also offers prospects for growth when the upturn comes.”

Mr Hancox believes that Birmingham will not experience further double digit falls in occupation costs.

“The most dramatic falls have been in cities which have traditionally been reliant upon the financial services sector. The last round of major lettings in this city were spread across financial services (Barclays and Deutsche Bank), professional services (KPMG and Wragge & Co) and the public sector (Highways Agency). We are not overexposed to any one sector and offer broad appeal to a wide range of occupiers. The city also has a wide range of ‘sustainable’, environmentally friendly buildings for indigenous and footloose businesses that might be prepared to commit to new or alternative space and take advantage of the challenging economic climate,” he added.

Copies of CB Richard Ellis’s Global Market View: Office Occupancy Costs are available at www.cbre.com.

 

ENDS

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