Birmingham Crane Survey Development returns Contents

The report 1

Key findings 2

Birmingham snapshot 4

Crane Survey results 6

Outlook 14

Development table 17

Contacts 20

The report

What? A report that measures the volume of development taking place across central Birmingham and its impact. Property types include office, retail, leisure, residential, student accommodation, education and hotels.

Where? Central Birmingham, including parts of Digbeth, Jewellery Quarter and Edgbaston.

Who? Developers building new schemes or undertaking significant refurbishment of the following: Size minimum = office − 10,000 sq ft, retail − 10,000 sq ft, residential − 25 units, education, leisure and hotel schemes – significant scheme for inclusion.

When? This is our first report since September 2013. Our research for this Crane Survey was undertaken between 28 September and 6 October 2015.

How? Our in-house real estate team in Birmingham have monitored office construction across the city. Our field research is then verified with direct industry links and in-house property experts.

Birmingham Crane Survey | Development returns 1 Key findings

2 Key findings

Crane Survey results 9 new schemes have started, Office construction highest 693 hotel rooms under below the average (11) level in over 13 years construction

Outlook Investor interest looks Developers work up plans Connectivity towards the regional cities for more schemes to boost Birmingham

Birmingham Crane Survey | Development returns 3 Birmingham snapshot

4 Development snapshot Birmingham

Which sectors are active? Number of schemes under construction

3 hotel

1 residential 1 6 Office space under student office construction 969k sq ft 0 education 0 retail

Number of new starts Total amount of office space under Oct 2015 2012 2008 10 year construction which has been let average Residential units under 14 construction 600 11 9 9 32% let 0% 100%

Number of completed schemes since last survey (2013) Student bedspaces under construction 650 9

Birmingham Crane Survey | Development returns 5 Crane Survey results

6 Office Largest volume of office space under construction

Total office volume under construction per survey Increase in developer sentiment leads to rise Sq ft in construction 1,200,000 There is currently 969,000 sq ft of office space that

1,000,000 is under construction across Birmingham. This is the highest level since we began our Crane Surveys in 800,000 Birmingham and significantly higher than the last peak in 2008 and considerably above the 10-year average of 600,000 384,000 sq ft. It is also a far cry from the historic low volume of office construction in our 2013 Crane Survey 400,000 of 14,000 sq ft. It is clear that developer confidence has returned, heralding a mix of both speculative schemes 200,000 and pre-let driven developments.

0 Six new office starts are recorded in this survey which is the most we have seen in a single Birmingham Crane 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Survey. After a period of low levels of construction, activity has returned to the city.

Number of office starts per survey Occupier take-up driving development decisions At the time of the survey office take up so far had reached 732,000 sq ft but was predicted to reach over 800,000 by the end of 2015. The volume of leasing activity has been growing year-on-year since 2012. However, back in 2013 we remained cautious about any rush to develop new space when there was still a considerable number of Grade A offices still available. The tide has since turned and as the level of available space has eroded away over the past couple of years, occupier focus on the city has returned. Developers are now ready to respond to an increase in potential demand.

Occupier choice is constrained to but a few existing schemes. Of the space under construction, 32% is already let. 3 2 2 1 1 1 1 0 6 2007 2008 2009 2010 2011 2012 2013 2014 2015 Birmingham Crane Survey | Development returns 7 Developers focus on the city centre Birmingham: office development pipeline Sq ft In previous years we saw a propensity to develop 600000 schemes in the submarkets of Edgbaston, Digbeth and the Jewellery Quarter. Construction of new space is 500000 now more concentrated in the city centre and the core. 400000 A significant amount of Birmingham’s existing office 300000 space is located within the Colmore District. This is a well-established office area recognised by investors and 200000 occupiers alike and it should be no surprise that we are seeing increasing investment. 55 is 100000 one of the most recent projects to begin. The Grade II 0 listed 19th century building will provide approximately 160,000 sq ft of Grade A office space, arranged over 2012 six floors. 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2013 2014 2015 2016 2017 2018 Completed Available u/c Let u/c Currently interrupting the Birmingham skyline is a large crane hanging over , the former Natwest Tower. The 1970’s office building had been vacant since 2003 until the developer received planning permission to demolish the 22 storey building. In its place they are set to construct a landmark office/ retail development providing approximately 200,000 sq ft of Grade A accommodation.

Investor interest As the occupational market strengthens, investment activity in the city has risen. There have been a number of notable deals completed during 2015 including One Colmore Row and Colmore Plaza. Investment deals have occurred right across the city centre with Seven, Eight and Ten selling in February 2015 and Three, Four, Five, Six and Nine Brindleyplace currently on the market. This level of activity has pushed prime office yields on the very best stock to below 5% for the first time since the financial crash.

8 Hotel, Leisure & Retail The opening of the next chapter in Birmingham’s history

Birmingham’s retail offering expands The latest Crane Survey results show that over 700,000 sq ft of new retail space across three schemes has completed and opened in 2015.

As part of the £600 million refurbishment of Birmingham New Street Station, Grand Central Shopping Centre has been created above the station, providing a landmark development for the city. The shopping and dining destination is anchored by a 250,000 sq ft John Lewis, the largest in the UK outside . In addition, 50 other national retailers have taken space in the development. Early trading figures and footfall have exceeded expectations and public reaction has been overwhelmingly positive.

The Mailbox has also undergone a transformation and relaunched. The extensive refurbishment and remodelling provides an alternative shopping and dining destination. This includes a 45,000 sq ft Harvey Nichols store, which the company hopes to be the blueprint for all future Source: Courtesy of Grand Central UK stores. The redeveloped scheme opened in September 2015.

Retail and leisure to bolster mixed-use schemes With the number of new schemes springing up in Birmingham, retail and leisure accommodation is continuingly being used to bolster mixed use developments. Birmingham’s Bull Ring Shopping Centre has provided a retail hub for the city for many years, attracting shoppers from across the Midlands. Parts of New Street and High Street have benefitted from this, offering retailers a traditional high street pitch with an expectation of improving footfall. New developments taking place such as Paradise and Arena Central will widen out the retail offering even further. Both schemes are planned to offer ancillary leisure and retail space which we expect will ultimately include new shops, bars, restaurants and possibly specialist retail.

Another scheme of note includes work on the remodelling of the Pavillions Shopping Centre which has yet to get underway.

Source: Courtesy of The Mailbox

Birmingham Crane Survey | Development returns 9 Resurgence in Birmingham hotel rooms Birmingham: hotel development pipeline No. of rooms After a hiatus of hotel development across the city in 600 2014, the pipeline for new hotel rooms has increased. 501 With over 690 rooms currently under construction across 500 459 three schemes, this level is three times that of the 10-year 443 average. 400 371

300 This development appears to be warranted as hotel 231 250 occupancy rates have reached new record heights in 200 2015 according to Marketing Birmingham’s Regional 108 Observatory/STR Global. Total occupancy was 73% in 100 50 the first six months of 2015, the best half-year results 0 0 since their records began in 2007 and an 11% rise on 2014. Birmingham’s concert and conference events 2012 have helped towards this growth and with greater 2007 2008 2009 2010 2011 2013 2014 2015 2016 2017 shopping credentials with the opening of Grand Completed U/C Central, the city is hoping that level will be maintained and increased.

Further schemes in the pipeline include work to the façade and roof of the Grand Hotel which is set to be completed this year and internal refurbishment is planned to commence early in 2017.

10 Residential 2015 marked the start of a new generation of residential

Birmingham: residential development pipeline Residential development falls short of expected demand No. of units According to ’s Housing Prospectus there are around 30,000 10 year high 10 year Under people living in . This number is expected to continue to rise (2008) average construction and the level of new residential developments will need to keep pace to meet demand. Birmingham City Council estimates that over the next 15 years, the city centre has the potential to accommodate around 12,800 new homes. This development is likely to spread further across the city centre expanding the traditional residential development areas such as just beyond Brindleyplace and the Jewellery Quarter, driven further by the growing private rented sector.

The latest Crane Survey highlights that, although we have one new residential start of 600 units, our historic series shows that the delivery of new residential units within 1,983 the city has been below the 10-year average consistently since 2009. Despite this there are a number of schemes that are being readied for construction.

Further development at Arena Central is planned to provide the city centre with an additional 412 new residential apartments across two buildings. The scheme will 630 600 incorporate a 26 storey building offering 245 apartments and a 10 storey building offering 168 apartments which will be situated to the west of the site along Bridge Street.

Another notable future scheme is Great Charles Place which is planned to incorporate a £100 million mixed used development, led by Sterling Property Ventures. The scheme was originally incorporated in the Snow Hill Master Plan and occupies a site within the Jewellery Quarter, close to Snow Hill Station. Phase One, planned to start on site in January 2016, will include 320 residential apartments with approximately 28,000 sq ft of commercial space. The developer is also thought to be seeking outline planning permission for Phase Two of the development which will provide a further 205,000 sq ft of office accommodation.

Birmingham Crane Survey | Development returns 11 Seven Capital are promoting a large scale development Potential at St Georges Urban Village in the Jewellery Quarter. Size of site Scheme capacity Planning status The development, which also includes The Kettleworks, (ha) (dwellings) is set to provide around 550 residential units arranged over 430,000 sq ft of floor space. The scheme is Exchange Square, 0.4 1000+ Outline permission currently being master-planned and should provide another boost for Birmingham’s residential offering. Connaught Square 1.8 700 Expired Birmingham City Council has sighted 12 development Lancaster Front site – 0.32 sites across the city centre which have been scoped 700+ Granted for residential uses. We summarise the five largest of Gateway Rear site – 0.46 these schemes as at March 2015 and can be seen on Banbury Wharf, No application the map below: 9 700 Montague Street received

Kettleworks, No application 2.6 500 A41 Jewellery Quarter TO M6 J6 received A41 A34 A38M A34 NEW JOHN STREET WEST A4540 NEWTOWN MIDDLEWAY 0 4

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SNOW D COLMORE O HILL SQ O SANDPITS W JENNENS ROAD Y PARADE Lancaster Gateway D GT CHARLES ST T A REE W L CORNWALL ST ST PHILIP’S SQ N ST CURZO A PARADISE EDMUND COLMOREST ROW T NIA E CIRCUS CHAMBERLAIN SQ BanburyR Wharf, Montague Y

CENTENARY VICTORIA SQ L A SUFFOLK ST MOOR ICC SQ ST M

BRINDLEYPLACE I NEW BULL RING D STREET D ET L E E MIDDLEWAY R K W T MAILBOX O S RO A D B Y A ALL SM DIG BIRMINGHAM CITY F.C. RO BETH B (ST ANDREWS)

WHOLESALE Connaught Square AD HE MARKET TO M5 J3 FIVE WAY HOLLO WAYS H ROW AT B

H A GLEY I ROAD S L ING H T I O G D H A N F O R IE R O L E W D RN TO B’HAM INT. A456 R O M D RB I AIRPORT HA D A45 DL EW CALTHORPE ROAD AY AUGUSTUS ROAD

BIRMINGHAM CITY UNIVERSITY A38 BRISTOL STREET

Map source: Birmingham City CouncilWESTBOURNE – Housing ROAD ProspectusWHEELEY’S ROADMarch 2015

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A38 A38 Student housing, education & research Student accommodation development is back

Birmingham: student housing development pipeline New student digs No. of bedrooms The latest Crane Survey results show that after two 1400 years, development of student accommodation has 1200 returned to the city centre, with one new scheme of 650 bedspaces being developed. 1000

800 The substantial mixed-used development by Goodman is

600 located in the area, off the A47 Jennens Road. The scheme will encompass both commercial 400 and residential uses, as well as a hotel and student

200 accommodation serving Birmingham City University

0 (BCU). The student provision is just one element of this site which will deliver office space for BCU. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Education facilities

Completed U/C Once a regular feature on our development lists, construction of new education facilities has fallen by the wayside in recent years. University College Birmingham’s Holland Street site is the only scheme to feature in this survey, having completed in 2015.

Birmingham Crane Survey | Development returns 13 Outlook

14 Outlook Regional city development back on the cards

The return of the Crane Survey after development hiatus Connecting Birmingham at a local, national and Following an upturn in the real estate market and a recovering international level economy we felt that the time was right to bring back the Birmingham Further improvements at Birmingham airport, substantial investment Crane Survey. Our last survey in 2013 highlighted a 10-year low in in New Street Station and the extension of the tram through the heart new schemes, coming off the back of a relatively healthy level of of the city have all helped the City improve connectivity. The arrival of development across most property types. Our latest results show that, High Speed Two will provide stimulus for further growth and inward whilst not all sectors are seeing construction levels back to previous investment in the Birmingham market. levels, the office and hotel sectors are driving current commercial development in the city. High Speed Two is expected to create more jobs once completed and provide opportunities for greater investment in the Birmingham and job creation region. Phase One of the scheme is set to provide a high speed rail line The bridge between London and the regions in the recent economic connecting Birmingham and London, reducing the journey time to 49 downturn appears to have strengthened, with confidence in minutes. The first phase is targeted for completion in 2026. Following Birmingham and the other regional centres improving year-on-year. this, Phase Two is set to provide a high speed line connecting This has been reinforced by the commitment from HSBC earlier in 2015 Birmingham to other major regional cities including when it announced the relocation of its UK retail operations to the new and . Arena Central development. This was in addition to High Speed Two announcing the largest ever public sector relocation to Birmingham Birmingham City Council has also invested in extending the tram when it agreed to occupy Two . Both the HSBC and High Speed facility to increase manoeuvrability within the city. A new route now Two relocations are estimated to create around 2,500 jobs alone. links Snow Hill and New Street Station, via Bull Street and Corporation Street. Further phases are planned to connect the existing line to the The prospects for further job creation in Birmingham remains positive, Paradise development and on to Five Ways and Edgbaston with long buoyed by the £275m from the Birmingham City Centre Enterprise term ambitions to connect the Airport. Zone Investment Plan. The Enterprise Zone comprises 26 sites across the city centre with 14 million sq ft of new floorspace and 40,000 In terms of aviation, Birmingham Airport is currently ranked 7th in the private sector jobs anticipated to be created. The investment plan UK in terms of total passenger numbers and continues to increase timeline stretches until 2023, with significant growth opportunities year on year. The airport continues to support the local economy and identified in some of the following areas: recently commenced daily flights to India, which provides the most foreign investment from outside of London. • Snow Hill District; • Eastside; • Digbeth Creative Cluster; • Birmingham Science Park Aston; and • Jewellery Quarter.

Birmingham Crane Survey | Development returns 15 Investors look towards the regions

JEWELLERY ET ET RE ST L EL 2015 has been a superb year for Birmingham with a QUARTER X STRE LIV T CO E DW CA R RO Y SHA STREET S ASTON STREE LINE T D ST RE O S P E O T T REE AU HW L’S steady flow of good news stories. The initial phases T SQ Birmingham T U NORT E A Dental Hospital RE Children’s JA TRE MES S K Whittal A&E ST Street ROO ASTON REET B of Paradise and Arena Central and demolition of the T Clinic Birmingham S E T E PA R Childrens T W U S Hospital TRINGLE L H JAMES ’S SQ R IT E T T A U L S AR STREET WA T WA former NatWest tower have all commenced and this M E R A SN WE E GRAH E O AMAN T SNOW W TT LUDGA P HILL RI QUEEN T HILL N E ST T E TE QU ING STATION R TR S HILL EEN EE H T SW has stimulated more optimism and interest in the OUS S LIVE WA EORGE E S A G Y Y R T Y RE STR E T EE NE T ET T W E market. The inward investment will bring a great RE TO RE N S T ST S

CH L T NE REE U AL ON ET WH R W T T E C L H R A H RN O T L S O DA S L T LL E S C D AN T TRE A stimulus to the city and as new jobs are created we will O D OT EET E R ST TR T RE RL S NS E HA NE T C FLEET JEN T EE ET ET E TR see a positive and immediate knock on effect in the S TR TRE S CH CK D S UR RWI AY A NE C B IONEL MUN L SW WH H P HOLIDAY ED ST W AR EEN A O A L DE INN EXPRESS L RE R THE QU S O PRIO private rented sector, hotels, bars and restaurants in the TRE R ET Y QU UNIVERSITY E LM E R ET CO ENS T WAY SUM COLLEGE S MER ROW BIRMINGHAM ES MA RL A R MA H GARET SSH C OUSE vicinity. LAN AT D E E ST N R E GR EET

ALE C D Y H A W E RR W E RO Y ST OR LM O UEENS C Q T T FAZ REE EE ELE ST Y STRE OO T ET RL B Investors have increasingly looked towards the regions E STR T E R EE PARADISE WA N O

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T R S HILL U NIO CA PA ANNON S N STR RRS C EET LA to find higher yielding assets offering better value for NE NE W STREET EASTSIDE ET

FLETCHERS WALK RE T S SHOPPING MALL MOOR CUS PINFO their money compared to London with real prospects of REET CIR ST NEW STREET AY L HIGH OAD RADISE D STR BR PA ENSW S EET STATION QUE TRE E T SH A HILL W S P continued rental growth. M AS OO SA ST R STR G B R EE E R EE NEW T U T N EL STREET S TREE H T IL N STREET L T

ATIO ST EE EET IG RE TR AV STR S N ET AY K ID R L PA With initiatives such as the Birmingham City Centre HOL T WE S LL C SU RN LA OV EVE NE EN F S REET TR F R JO T Y OLK S S TR WE H E O N E L STR N T Enterprise Zone Investment Plan, Birmingham City STRE BEAK O B

E RI ET ET LLIS ST GH QUEEN DIGBE A R T E DIGBETH E T ET T H RE SW ST M Council is continuing to drive the city forward. The AY OA WESTSIDE ERN V REET T SE ST LAN AN E DE DI PER GBET UP H Council and Marketing Birmingham have worked hard to increase the attractiveness of Birmingham to inward

New tram line extension investors and occupiers. Their commitment to schemes such as the new Library and New Street Station through the dark years of the recession are now paying dividends as developers from the private sector feel more confident to take on risk and invest in speculative development.

16 Development table

BirminghamBirmingham Crane Crane Survey Survey | Development | Development returns returns 17 Development table

Total size Completion No. Name/address Developer Main use sq ft/units date Comments City Core – Under Construction 1 55 Colmore Row IM Properties Office 160,000 sq ft 2016 Redevelopment of the 19th century Grade II listed building to provide Grade A office accommodation due to complete in Autumn 2016. City Core – Completed 2 Grand Central, Birmingham New Network Rail/ Retail 155,000 sq ft 2015 Opened Sept 15 Street Station Birmingham City Council 3 John Lewis, Stephenson Street Network Rail Retail 250,000 sq ft 2015 Opened Sept 15 City Centre – Under Construction 4 Assay Office building TCN Office 30,000 sq ft 2016 TCN plan to carry out a refurbishment of the existing space into new office accommodation. In addition, phase two of the scheme will involve the development of a residential block of apartments on the existing car park site. 5 Two Cornwall Street Bruntwood Office 110,000 sq ft 2016 6 Lloyd House Wilmott Dixon Office 105,000 sq ft 2016 Refurbishment of the existing West Midlands Police HQ. The project which will see internal refurbishment and changes to the façade is underway. 7 The Beneficial Building Gethar Ventures Hotel 137 rooms/53 2016 apartments 8 Park Regis, Five Ways Seven Capital Hotel 253 rooms 2016 9 Broadway, Fiveways Seven Capital Residential 600 units 2016 10 Eastside Locks Goodman/ Student 650 bedspaces 2016 Alumno accommodation Developments 11 Arena Central – Phase 1 Miller Office 210,000 sq ft 2017 The scheme is planned to accomodate 10 buildings including 670,000 sq ft Developments/ offices of Grade A office accommodation. HSBC have already committed to take Pro Vinci Asset 210,000 sq ft of office space. Management 12 Arena Central – Phase 1 Miller Hotel 250 rooms 2017 Holiday Inn Experess have committed to operate a new 250 room hotel on Developments/ the south of the site from 2017. Pro Vinci Asset Management 13 Paradise - Phase 1 Argent/Hermes Office 354,000 sq ft 2018 The development has been split into three phases which will be developed Real Estate over a 20 year period. The scheme will provide a mixture of office, retail and leisure accommodation within the city centre. City Centre – Completed 14 Central Plaza, Park Central Crest Nicholson Residential 132 units 2013 15 One Cannock Hotel 168 rooms 2013 Developments 16 Enterprise House, Hortons Office 13,376 sq ft 2013 17 The Mailbox Milligan/ Retail 300,000 sq ft 2015 The Mailbox has undergone a £50 million refurbishment which has Brockton Capital included adding a roof and expanding the Harvey Nichols anchor store. Jewellery Quarter – Under Construction Jewellery Quarter – Completed 18 The Mint, Icknield Street Raybone Residential 224 apartments 2014 Developments 19 University College Birmingham University Education 82,000 sq ft 2015 Campus, Holland Street College Birmingham Edgbaston – Under Construction Edgbaston – Completed 20 Phase 2 Highfield Gardens Taylor Wimpey Residential 33 apartments 2013 Digbeth – Under Construction Digbeth – Completed

Red text indicates a new start

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CENTENARY VICTORIA SQ L A SUFFOLK ST QUEENSWAY MOOR ICC SQ ST M BRINDLEYPLACE 7 2 I NEW BULL RING D 12 11 STREET D ET L E E MIDDLEWAY R K W T MAILBOX 3 O S RO A D B Y A 17 ALL SM DIG BIRMINGHAM CITY F.C. RO BETH B (ST ANDREWS)

WHOLESALE AD 9 HE MARKET TO M5 J3 FIVE WAY 8 HOLLO WAYS H ROW AT B

H A GLEY I ROAD S L ING H T I O G D H A N F O R IE R O L E W D RN 14 TO B’HAM INT. A456 R 20 O M D RB I AIRPORT HA D A45 DL EW CALTHORPE ROAD AY AUGUSTUS ROAD

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A38 A38 Contacts

Midlands Head of Real Estate Author

Edwin Bray Shaun Dawson Partner Research Manager 0121 695 5636 020 7303 0734 [email protected] [email protected]

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