UK Commercial – Summer 2021

MARKET IN MINUTES Offices Savills Research

Summary: Take-up in Q2 2021 was the highest take-up since Q1 2020 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 -27%

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 currently 27% below the 1,000,000 200,000 five-year annual average

500,000 100,000

- 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 H1 54% Source Savills Research of take-up was Grade A in the first half of 2021 – demonstrating a 'flight to quality' within Birmingham city centre office market round up the market Savills expects prime rents in Birmingham city centre will continue to rise, reaching £40 per sq ft over the next three years

The rollout of Covid-19 vaccines Almost a quarter of H1 take-up quality space in the market. However, 1 across the UK has raised hopes 3 (24%) came from the Public three major schemes are currently that Birmingham city centre will Services, Education & Health sectors on site - 103 , Paradise soon be full of office workers – even if and with IWG taking 50,000 sq ft and 10 , totalling over that is on a part-time basis. Positive at the Mailbox in April, the Serviced 700,000 sq ft, which will help satisfy sentiment is starting to filter through Office sector also accounted for any pent-up demand as well as help to take-up. with take-up in the second 20% of take-up. The growth of the attract occupiers to the city. quarter of 2021 the highest level since BioSciences sector was also evidenced Q1 2020 and up 11% on the five-year in H1 2021 accounting for 18% of The top rent in the city centre quarterly average. take-up. 6 is currently at £37 per sq ft, Public Services, where an impressive 7.2% growth was Education & Health and Take-up in the first half of At the end of Q2 2021, total achieved during 2020 - the highest the Serviced Offices 2 2021 in Birmingham city centre 4 availability in Birmingham rental growth of the big six office sectors accounted for reached 253,336 sq ft over 44 deals, city centre sat at 1.5 million sq ft, markets. Continued rental growth is 44% of take-up in H1 with H1 2021 showing an increase reflecting a 34% decrease on the five- expected, potentially reaching £40 per 2021 of 110% on the second half of 2020. year average level. sq ft within the next three years. There is also a growing 'flight to quality' with 54% of H1 take-up being Grade A supply is also of Grade A quality. 5 significantly below the five-year average level (27%) and totals 252,400 sq ft. With less than a year's prime £40 psf Grade A supply in the figures, this demonstrates an undersupply of high- Savills predicts that Birmingham will see rents of £40 per sq ft in the next Grade A supply is 27% below the five-year average, with less than one year's three years worth of supply available Birmingham Offices

Sustainability is at the forefront of office development in Birmingham city centre Demand for high-quality sustainable offices continues to grow post- pandemic Savills team Demand for high-quality regional Millennials are 81% less likely to emphasis on health and wellbeing as offices has grown significantly over move jobs in the next year if their well as improved public realm. Please contact the last decade. With offices now being employer focuses on employee us for further used as a recruitment tool and a key wellbeing, according to a recent Gallup- Tenants are also reducing their own information feature in the race for talent, occupiers Healthways poll. By designing their carbon footprint, with 103 Colmore Ben Thacker want the best space to satisfy their offices to promote wellness, businesses Row the first building in Birmingham’s Director workforce. can reduce staff turnover. CBD to connect to the city’s fourth Office Agency district energy system. The new 0121 200 4561 The increased public interest in Roof terraces and an abundance of system means there is no need for [email protected] protecting our environment, as well as biophilic design, can provide employees fossil-fuelled boilers or heating in UK law requiring all companies to reach space to take breaks outdoors. And the building, lowering energy costs, Nick Williams net zero carbon by 2050, has heightened by incorporating plentiful bike racks reducing emissions, and improving Director the demand for sustainable offices. and shower facilities, employees can local air quality, which is reflected in Office Agency Upgrading to a sustainable office can commute to work sustainably. Biophilic the building’s service charge being 12% 0121 634 8401 be seen as an easy ‘win’ in reducing a office design and outdoor amenity lower than average. Once built, service [email protected] company’s carbon output, which will space are proven to boost productivity charges are forecast to be £5.70 per sq ft become increasingly important as we and mental wellbeing as well as helping (annually indexed) compared to £6.50 Matt Jenns move closer towards net zero. As such, to attract and retain talent. per sq ft on traditional buildings. Director 'greener' buildings could form a key Investment part of ’s Along with achieving an excellent The bottom line is that by being at 0121 634 8447 ambition to becoming net zero carbon BREEAM rating, 10 Brindleyplace will the forefront of the climate movement, [email protected] by 2030. be the first building in Birmingham green buildings will not only attract the to receive Fitwel accreditation. While investors and the occupiers they need Clare Bailey Quality of office space can play a BREEAM focuses mainly on building to benefit from the ongoing flight to Director role in encouraging workers back to infrastructure, Fitwel focuses on health environmental quality but will also help Commercial Research the office when the pandemic begins and wellbeing. The building will have to encourage workers back to the office 020 7409 8863 to ease. Employees will require a safer large flexible floorplates and an array when the pandemic begins to ease. [email protected] and more desirable workplace than of wellness amenities and facilities pre-Covid-19. Buildings demonstrating offered. As employers look for ways to The brand enhancement that comes the most sustainable credentials will attract workers back to the city centre, with putting sustainability at the heart attract the occupiers (and the investors) building offices that offer a better user of business will also help companies they need to benefit from the ongoing experience than working from home attract and retain the best talent and flight to environmental quality. will become critically important. clients.

As we emerge out of lockdown, Investment in social and cultural the office will become a place where infrastructure will become more colleagues connect, having spent so important. What is important is how much of the last 18 months working workplaces ensure that connection from home. Making buildings healthier and collaboration is maintained. and more attractive places to work will Development can also come in the support employees return to the office. form of a collaboration of uses, with an

10 Brindleyplace: Birmingham's first building to receive Fitwel accreditation, a standard to measure occupant health and Source Oxford Economic (May 2021) wellbeing.

Investment in social and cultural infrastructure will become more important post-pandemic