Lambert Smith Hampton (LSH) predicts that new office space will continue to be brought to market next year across the region as a whole and serve to keep prices at roughly their current levels.
However, the consultancy firm is convinced that supplies of Grade A offices in major Midlands cities like Birmingham and Nottingham will dry up further over the next few years as demand outstrips supply.
In reference to Birmingham specifically, LSH predicts that there will be a notable shortage of top-quality offices available for rent with only 300,000 sqft estimated to be on offer at the end of 2011.
Region-wide it could be well into 2013 before rental costs show any signs of increasing but the prevalence of rent-free periods being offered as incentives by landlords looks set to diminish in months and years to come, LSH said in its report.
“The office sector in the region has undoubtedly felt the impact of difficult market conditions over the last two years,” said Alastair McChesney, agency director in LSH’s Birmingham offices.
“We’ve seen a limited appetite for speculative development, regeneration schemes stalling due to lack of investor confidence and public sector grant support, and an abundance of vacated second-hand stock,” he explained.
One speculative scheme given the green light by planners in Birmingham this year will see Miller Developments and Bridgehouse Capital work on an expansive £400 million mixed-use initiative in the city centre. The Arena Central project will incorporate the construction of roughly 800,000 sqft of new offices.
Editor’s notes: In February 2024, it was announced that Wilko’s former head office building in Worksop in the East Midlands had been placed on the market.
The household retail chain’s former HQ building extended to 120,000 square feet and was located in the Manton Wood area which is the home of several notable occupiers including B & Q, DHL and Royal Mail.