Savills : Birmingham office investment set to exceed record level…

Key office investment deals in Birmingham so far in 2018 include: The European Cities Fund acquiring 55 Colmore Row for £98 million and The Railways Pension Trusties purchase of 2 Colmore Square for £95 million. Savills research highlights that the strength of Birmingham's investment market is reflected in prime yields for the best space, which the firm reports at 4.75%, just 75 bps above the City of London.

Andrew Bull, investment director at Savills Birmingham, comments: 'Whilst investors are being considered about what they buy, we have seen strong activity across Birmingham's office market this year which we expect to increase further by the end of the year. As we move into 2019, investors will inevitably be cautious with regards to the wider economic picture around Brexit however, there remains a robust level of capital waiting to be deployed. In addition, the predicted tightening in the occupational market, rising overseas investor interest and growing shortage of openly marketed stock is likely to hold prime yields firm.'

With regards to leasing market in Birmingham, Savills report shows that take-up remains healthy reaching 469,000 sq ft in Q318, with the firm predicting a final figure for the year of 800,000 sq ft, 18% above the long-term average. Following an extremely strong year in 2017, the public sector has again accounted for almost 20% of take up in the first three quarters of 2018. However, it is the serviced office sector that has continued to excel in 2018 accounting for 23% of take up having witnessed unprecedented growth in Birmingham over the last 18 months.

Savills research notes that the overall strong take-up levels, combined with limited supply, has resulted in Grade A supply sitting at its lowest level since Savills records began, with only nine months' worth of this type of supply available.

Nick Williams, director of office agency at Savills Birmingham, says: 'Over the next two years we will see a million sq ft of office space come into the supply figures however, 59% of this space is already let prior to practical completion, which significantly reduces the level of new space coming to the market. This restricted pipeline is inevitably likely to put upward pressure on rents, which currently stand at £33 per sq ft, in 2019 and 2020 as market dynamics change in favour of the landlord.'