UK Commercial – Spring 2021

MARKET IN MINUTES Offices Savills Research

Summary: Take-up in Q1 2021 was 23% up on the previous quarter, while supply remains limited. Take-up, supply, rental performance Key data points Q1 Q2 Q3 Q4 Supply Prime Grade A Supply 1,000,000 4,000,000

900,000 3,500,000

800,000 3,000,000 700,000 -23% 2,500,000 Ft) 600,000 Sq

500,000 2,000,000 up (Sq Ft) - 400,000 Supply ( 1,500,000 Take Grade A supply is 300,000 1,000,000 currently 23% below the 200,000 five-year annual average

500,000 100,000

- 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Q1 Source Savills Research 0.7 Birmingham city centre office market round-up years of Prime Grade A supply - demonstrating Savills expects prime rents in Birmingham city centre will continue to rise, an undersupply of high reaching £40 per sq ft over the next three years. -quality office space within the city. Birmingham’s local lockdown they were at the same time in 2019. employee wellness and sustainability 1 from September last year, has We expect this pent up demand and this will help to satisfy the understandably had an impact on to translate into take-up as we go rising demand from occupiers who occupiers decision making. During through the rest of the year. are seeking the very best quality the first quarter of 2021, take-up space - enabling the city to continue in Birmingham city centre reached At the end of Q1 2021, total to accommodate further inward 49,837 sq ft over 19 deals and was 3 availability in Birmingham investment and pent up demand 73% below the five-year quarterly city centre sat at 1.7 million sq ft, within the city. average, although Q1 2021 showed an reflecting a 25% decrease from the improvement on Q4 2020, exceeding five-year average level. The top rent in the city centre it by 23%. 5 is currently at £37 per sq ft, Grade A supply is also where an impressive 7.2% growth was Encouragingly, with optimism 4 significantly below the five- achieved during 2020 - the highest 2 among the chief financial year average level (23%) and totals rental growth of the big six office Public Services, officers (CFOs) rising to the highest 300,998 sq ft. With less than a year's markets. Education & Health level in the 13-year history of the prime Grade A supply in the figures, accounted for 43% of Deloitte CFO Survey, far surpassing this demonstrates an undersupply This rent was achieved at Two take-up in Q1 2021 previous peaks seen after the global of high-quality space in the market. 6 Chamberlain Square on a deal to financial crisis and in the wake of However, three major schemes are knights who have signed up for 18,000 the December 2019 general election, currently on site - 103 , sq ft where it will base up to 160 it is little surprise requirements in Paradise and Ten employees. Continued rental growth the market are up 16% on the same totalling over 700,000 sq ft. These is expected, potentially reaching £40 time in 2020 and at the same level as schemes are offering the very best in per sq ft within the next three years. £40

Savills predicts that Birmingham will see rents of £40 per sq ft in the next three years. Grade A supply is 23% below the five-year average, with less than one year's worth of supply avaialble. Birmingham Offices

Location, location, relocation There is a strong case for a resurgence of northshoring in Birmingham post-Covid-19

The role that UK cities play in both Banking on Birmingham those offices even more important to Savills team the national and global economy is those occupiers and to Birmingham’s changing post-Covid. So, while It isn't just the public sector which is economy. Birmingham’s labour Please contact is still one of Europe’s economic making the move. Goldman Sachs has pool, multiple universities supplying us for further powerhouses, it is by no means the become the latest corporate to relocate graduates, and its tech sector as key information only hub of opportunity in the UK. staff to Birmingham following HSBC, draws are factors Goldman Sachs also Ben Thacker PwC and Deutsche Bank, which have cited for the move. Director Northshoring’ is back on the agenda, all set up bases in the West Midlands. Office Agency and the government is leading the way The bank will initially be a technology Although businesses often cite a lack of 0121 200 4561 with the adoption of truly inclusive hub, creating hundreds of jobs and skilled workers as a barrier to growth, [email protected] regional environments in open and set to open by the end of the year. ‘northshoring’ actually offers an modern workplaces. Although more divisions will move opportunity to tap into a less saturated Nick Williams to Birmingham over time, with pool of talent. HSBC moved its retail Director With HMRC’s 13 regional sites staff numbers eventually reaching arm from London to Birmingham at Office Agency confirmed, the Cabinet Office has now "several hundred". It will support the the start of 2018, with 88 per cent of its 0121 634 8401 outlined plans to move thousands government’s efforts to put economic 2,000 jobs filled three months before [email protected] more public sector jobs, including performance and wealth creation the move. senior roles, out of London by 2030. across the UK on a par with London Matt Jenns The move will result in a further 20 and the South East. There are a number of other drivers Director government hubs in the regions by in Birmingham’s favour. The cost of Investment the end of this parliament in 2022, Collaboration and culture living is cheaper than many other 0121 634 8447 with Birmingham a key player in these major cities, its centre has become [email protected] relocations. We anticipate that the pandemic will more appealing in recent decades and accelerate the flight to quality, with travel times to London are short. HS2 Clare Bailey Ministers also announced in March offices that can facilitate collaboration, will cut this further to just 45 minutes, Director that the Department for Transport creativity and community in highest down from 82 minutes currently. Commercial Research was to open offices in Birmingham demand. Matt Hammond, the 020 7409 8863 and , with more than 100 roles Midlands’ head of PwC, calls this the With the most recent Deloitte survey [email protected] created in Birmingham so far. The ‘work home’: a location as much about highlighting that the expectation Department for Business, Energy culture, learning and connectivity as it among CFOs is that the UK will be and Industrial Strategy (BEIS) also is about productive output. heading back to work over the summer, announced it was creating 175 roles Birmingham is in a key position to in the city - they come on top of While we expect there will be fewer capitalise on this and attract people to 150 BEIS positions already based in people travelling to city centre offices all the city has to offer. Birmingham, bringing the total to 325. each day, those that do will have a greater number of interactions, making

Summary: Birmingham is forecast to see total office-based employment growth of 6.5% over the next 10 years Office based employment growth Savills plc: Savills plc is a global 200 real estate services provider listed on the London Stock Exchange. We have an international network of more than 600 offices and associates throughout the 150 Americas, the UK, continental Europe, Asia Pacific, Africa, India and the Middle East, offering a broad range of specialist advisory, management and transactional services to clients all over the 100 world. This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any 50 Source Oxford Economic (May 2021) contract, prospectus, agreement or other document without prior consent. While every effort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or - consequential loss arising from 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written -50 permission from Savills Research. Administrative and support Financial and insurance Information and communication Professional, scientific and tech Public administration and defence Real estate activities Source Oxford Economics

As well as a vote of confidence for Birmingham, Goldman Sachs' move underlines the bank's commitment to returning to the office.