Birmingham Report Spring 2015
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RESIDENTIAL RESEARCH BIRMINGHAM REPORT SPRING 2015 ECONOMIC FUNDAMENTALS THE “BUSINESS” CASE HOUSING SUPPLY AND DEMAND BUILDING THE FUTURE The UK economy bounced back strongly last year, delivering the FIGURE 2 Annual economic output 2014 highest level of growth seen in any country in the G8 nations. As the Eurozone struggles with more fiscal uncertainty, the UK is seeing job creation and starting to see Birmingham wage growth, all in an ultra-low interest rate environment. £16.8bn “ Birmingham’s mix of regeneration, re-development The country’s economic recovery from and job creation, as well as the financial crisis and resulting recession Estonia the relatively lower entry price has started to spread to the regions, and Birmingham, the UK’s second-biggest city for property, means that its £16.1bn by population, has contributed with Iceland draw to homebuyers and economic output from the city outpacing investors will likely continue to the average seen across the UK in both £9.8bn grow in the coming years.” 2013 and 2014 (figure 1). This is just one of the signs that GRÁINNE GILMORE Birmingham is enjoying a post-recession Source: UN Head of UK Residential Research renaissance, not only in terms of jobs and business growth, but also in the fabric of At present, the level of new residential the city. The Big City Plan, laid out in 2010, stock coming to the market, especially in aims to ease the stranglehold that the City Centre, is limited. Our analysis of infrastructure such as key roads are future housing supply in Birmingham placing around the city centre, thereby suggests that supply will pick up from opening up large parts of the city. next year, but that there will still be a notable annual shortfall in our forecast The activity in Birmingham, in economic period to 2019 (figure 8). terms as well as public realm planning, is also helping feed the strong demand for Birmingham’s mix of regeneration, housing, not only from the domestic re-development and job creation, as well population within Birmingham, but also as the relatively lower entry price for from those from London and the South property, means that its draw to East looking to take advantage of the price homebuyers and investors is likely to differential on offer. continue to grow in the coming years. FIGURE 1 FIGURE 3 Total annual output (GVA) Birmingham: Output by industry GVA, £bn 7% UK WEST MIDLANDS 5.0 FINANCE & INSURANCE 6% BIRMINGHAM PROFESSIONAL & OTHER PRIVATE SERVICES 4.5 PUBLIC SERVICES FORECAST 5% 4.0 4% 3.5 3% 3.0 £ billions 2% 2.5 2.0 1% 1.5 0% 1.0 -1% 2010 2011 2012 2013 2014 2015 2016 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Experian Source: Experian 2 BIRMINGHAM 2015 RESIDENTIAL RESEARCH Economic Service industries outstripped that of its “ Intense competition, Public Sector by an estimated £133 million, big price tags and fundamentals contributing around £4.4bn to the city’s economy last year. In fact this segment of low yields in London In terms of economic growth, Birmingham the Birmingham economy has been the star has outperformed the UK and the wider are forcing investors, performer since the recession, growing by West Midlands region for the past two years. nearly 30% since 2009 (figure 3). both domestic and Annual Gross Value Added, a measure of international, to widen economic activity, rose by 2.3% in 2013 Evidence of the sustained recovery in the and 3.3% in 2014, compared with 1.8% private sector can also be seen by net their horizons. Turning and 2.9% respectively across the UK. business creation data – in 2009 and 2010 their back on the capital The pace of economic growth in Birmingham the city lost more businesses than it gained, for regional cities that is expected to average a more moderate but in 2013 over 1,600 more companies 2.1% per year over the next five years were created than folded and provisional offer less competition outperforming the wider West Midlands figures for 2014 suggest a similarly large and higher returns, average (figure 1). net gain (figure 4). [in particular] well-run With a Gross Value Added (GVA), a measure major cities with good of economic output, in 2014 of nearly FIGURE 4 local government; £16.8bn, Birmingham’s total is currently Birmingham: Net Business Creation 2009 - 2014 comparable to that of Estonia, which had a leadership is a key total output of £16.1bn in 2013, and some 2,000 factor impacting £7bn more than Iceland. business prospects. Brimingham’s strong recovery from the 1,500 ESTIMATE This includes cities UK recession has seen employment rise such as Birmingham.” across the city over the last few years, once 1,000 again outperforming the UK and regional Source: PwC “Emerging 500 annual growth rates in 2013 and 2014. Trends in Real Estate” – Employment is set to continue to rise Europe 2015 annually by an average of 1% across the 0 next five years. -500 The surprise driver behind this economic and lost Balance of businesses created resurgence has been the private sector – -1,000 for the first time since 2001, the output from 2009 2010 2011 2012 2013 2014 Birmingham’s Professional & Other Private Source: ONS 2013 Business Demography CASE STUDY: DEUTSCHE BANK IN BIRMINGHAM are, yet our teams need to be able to travel those working here can have a higher to and from there quickly if needed. standard of living than those on the same salary in the capital. Paul Anderson “Birmingham was an easy choice when it Head of Deutsche Bank came to picking a location outside “In terms of the lifestyle they Birmingham London. The key factor is the labour can enjoy, the city is almost market here, there’s a highly qualified unrecognisable compared to 15 Deutsche Bank has expanded its talent base – with skills that are highly years ago, it is a lively and exciting presence in Birmingham, with front transferable. We have been able to recruit place to be. Alternatively, our staff and back office staff all based in the highest calibre teams for compliance, can choose to live in the countryside, Brindleyplace in the business district. technology and professional services. and still be within a reasonable Paul Anderson, Head of Deutsche “For our graduate scheme we have commute of the office. Bank Birmingham, shares the reasons access to many smart young graduates “We can’t discount the proximity to behind the bank’s move, and explains from the major universities in the area. London however, and our staff can the attraction of Birmingham for a We find that these graduates value the be there within two hours, and large banking business. opportunity to have a banking career travelling there and back in a day is without having to move to London. “We have many roles within the Bank not arduous. We are very pleased which do not need to be based in “The disparity in the cost of living between with our choice of Birmingham as London, where our UK headquarters London and Birmingham means that a location.” 3 FIGURE 5 Changing face of Birmingham City Centre Private sector investment in the city is There was particularly strong occupier FIGURE 6 becoming mainstream, with a report on activity in Birmingham city centre in Birmingham office take-up, by emerging trends in real estate, from PwC, the second half of last year, with take-up sector H2 2014 ranking the city the 6th best in Europe for in Q4 alone totalling 341,164 sq ft, more investment, four places above London, than doubling the preceding three quarters % % and 7th for development. (figure 7). 16 16 16 16 There are increasing numbers of examples Total take-up for 2014 was 713,460 sq ft, % % % % of corporate investment in the city. up 7% year-on-year. Activity in 10 10 Deutsche Bank made a landmark decision these markets is being driven by the in 2013 to further expand their operations public sector, professional services and in Birmingham renting an additional banking & insurance sectors, which 4% 4% building on Brindleyplace and relocating accounted for 72% of total activity in the around 2,000 staff from London to create a second half of 2014. 3% 3% ‘HQ Campus’ (interview page 3). The buoyancy of the office market, as well 3% 3% 45% 45% More recently HS2 Ltd, the vehicle behind as the investment confidence in the construction of the new high-speed 2 2 Birmingham is perhaps captured by the % % 1 1 rail line between London and Birmingham fact that construction work has begun on % % and the North of England, rented nearly Birmingham’s most anticipated new PUBLIC SECTOR PUBLIC SECTOR 100,000 sq ft of office space. The decision PROFESSIONAL SERVICES PROFESSIONAL SERVICES commercial development scheme – the to base the headquarters of HS2 in FINANCE / BANKING FINANCE / BANKING transformation of 17 acres at Paradise TMT TMT Birmingham marks a further vote of Circus in the heart of the city centre. CHARITIES CHARITIES confidence in the city. CONSTRUCTION / ENGINEERING CONSTRUCTION / ENGINEERING RETAIL / DISTRIBUTION RETAIL / DISTRIBUTION The £500m scheme is aimed at revitalising OTHER OTHER this part of Birmingham; creating a PHARMA / HEALTHCARE PHARMA / HEALTHCARE The “Business” Case substantial number of jobs, office and retail The strength of Birmingham’s economy is space and helping to attract significant Source: Knight Frank Research echoed in the activity in its office market. commercial investment. 4 % 16 % 16 45% 10% 4 % 3 % 3 % 2 1 % % PUBLIC SECTOR PROFESSIONAL SERVICES FINANCE / BANKING TMT CHARITIES CONSTRUCTION / ENGINEERING RETAIL / DISTRIBUTION OTHER PHARMA / HEALTHCARE BIRMINGHAM 2015 RESIDENTIAL RESEARCH connections at the heart of the city will play Infrastructure boost FIGURE 7 a key part in providing a long-term boost to Sharp rise in Birmingham office Birmingham is well positioned to attract residents and business alike.