Redefining our place Birmingham Crane Survey 2019 February 2019 Contents Contents 01 The report 02 Key findings 03 Development snapshot 04 1. Office 05 2. Hotel, retail and leisure 08 3. Residential 10 4. Student accommodation, education, health and research 13 5. Outlook 15 6. Development table 18 7. Contacts 23 Endnotes and abbreviations 24 Redefining our place | Birmingham Crane Survey 2019 The report What? A report that measures the volume of development taking place across Birmingham City Centre, and its impact. Property types include office, retail, leisure, residential, student accommodation, education and hotels. Where? Birmingham City Centre encompassing those areas largely within the outer ring road including parts of Eastside, Westside, Southside, Digbeth, Jewellery Quarter, and Gun Quarter. 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 schemes for inclusion. When? The report covers the period from January 2018 to December 2018. Our research for this report was undertaken in Q4 2018. How? Our Real Estate team in Birmingham have monitored construction activity across the City Centre. Our field research is then verified with direct industry links and in-house property experts. 02 Redefining our place | Birmingham Crane Survey 2019 Key findings 23 new starts, one less New office starts are at than in 2017, however their lowest since 2014; well above the long however 2019 is set to term average. be a record-breaking year for office completions. Student accommodation Development pipeline construction volume has continues to grow with surged to it its highest 72 new starts over ever level, with the last three years. 2,667 bedspaces currently under construction. 1,262 Student 2018 has seen the accommodation most residential units bedspaces completed completed since 2008, in 2018; the most and a total of 5,065 units since 2010. 1,209 are currently under expected to complete construction is the in 2019 with another highest in the history of the 1,458 in 2020. Birmingham Crane Survey. 03 Redefining our place | Birmingham Crane Survey 2019 Development snapshot Whic ector r h os ctive Numbe cheme nde nstruction) 6 Office 5 Student accommodation 3 Hotels 20 Residential 2 Retail and leisure 2 Education Numbe e tart Numbe e tart ecto 13 Residential 505 4 Student accommodation 23 2018 2018 survey 24 2017 2 Eduation 25 2016 183 2 Office 2008 survey 9 2015 14 2008 1 Hotels 19 Average 555 1 Retail and leisure average 20082018 Number of scheme Office space under Residential units completions 2018 construction completed 16 1,405,260 sq ft 1,696 04 Redefining our place | Birmingham Crane Survey 2019 1. Office The latest crane survey results show that the number Birmingham: Total office volume under construction per survey of new starts has fallen to just two new office sq ft developments from the four recorded in 2017; 1,600,000 however total office volume under construction 1,400,000 remains high at 1.4 million sq ft, consistent with 1,200,000 construction volumes in the previous two years. 1,000,000 Our research shows that speculative development has increased in 2018. Of the total space currently under 800,000 construction, approximately 33% has been pre-let 600,000 (467,260 sq ft). This suggests that whilst there may be 400,000 short-term uncertainty in the occupier market due 200,000 to Brexit, the Birmingham office market continues to 0 attract interest from occupiers. A total of 286,254 sq ft 2011 2012 2013 2017 2015 2014 2016 2018 2010 2009 of office space was completed in 2018, a figure slightly 2008 above the 10-year average; however with a number 2008-2018 average of large schemes expected to complete, 2019 is set to surpass this figure with a record-breaking number of Source: Deloitte Real Estate completions expected. Number of new office starts per Crane Survey 7 6 4 2 2 2 1 1 1 1 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 05 Redefining our place | Birmingham Crane Survey 2019 Following the record 2017 performance, leasing activity The need for flexibility slowed in 2018, but has remained consistent across The 2018 Crane Survey reported strong demand for each quarter in the absence of a large headline deal. serviced operators and this trend shows no sign of With the outcome of Brexit still unclear, some business letting up. Serviced office space accounted for 23% of relocation decisions have been put on hold and the take-up and has experienced unprecedented growth popularity of serviced offices and flexible letting over the past 12 months. arrangements has continued to increase. Take-up totalled 755,137 sq ft across 113 deals.1 Flexible workplace options are proving popular with office occupiers, as businesses look to reduce their The HS2 project has continued to build momentum, commitment to longer leases and remain responsive to with Birmingham becoming increasingly appealing new opportunities. to major occupiers from a range of industries from IT and tech to engineering. Businesses are looking to Birmingham: Office development pipeline sq ft strategically position themselves in order to benefit from the national infrastructure improvements. Major 900,000 lease deals in 2018 include: 800,000 700,000 • Belmont Works, Eastside: BCU – 118,240 sq ft 600,000 500,000 • The Mailbox: WSP – 46,100 sq ft 400,000 300,000 • Somerset House: BE Group – 38,162 sq ft 200,000 100,000 • Norfolk House: Secretary of State – 36,484 sq ft. 0 2011 2012 2013 2017 2015 2019 2014 2016 2018 2010 2021 2020 2009 HSBC have now taken occupancy at One Centenary 2008 Square, Arena Central, whilst Argent’s Paradise scheme Completed Available U/C Let U/C Average at One and Two Chamberlain Square continues to Source: Deloitte Real Estate progress well. Three Snowhill is set to complete later in 2019 and has the potential to attract another major employer to the region. 06 Redefining our place | Birmingham Crane Survey 2019 The volume of office space under construction As a sign of confidence in the future of the market, around the city centre remains at the highest levels work has now started at 103 Colmore Row. The ever seen, however the availability of Grade A space scheme is set to provide 223,000 sq ft of office is still relatively limited. With demand for city centre space, in addition to a rooftop bar and restaurant. residential space soaring in recent years, many office The development is the latest scheme to commence builds have been converted to residential schemes, speculatively, with various other large schemes in particularly in areas such as the Jewellery Quarter, the pipeline that are set to begin in 2019. Planning exerting more pressure on a constrained market. permission has been approved for the Axis Square development project. This two-phased scheme Long-term confidence remains involving the demolition of the existing Axis building In 2018 the Birmingham office market experienced high will provide an office-led development, accommodating levels of investment activity. Major deals include: over 950,000 sq ft of office space plus ground floor retail/leisure space across four buildings. • 55 Colmore Row – acquired by The European Cities Fund for £98 million, representing a yield of 4.9% Key Statistics • 2 Colmore Square – acquired by The Railways Pension Trusties for £95 million in a deal reflecting a Completed 2018: yield of 6.4%. 286,254 sq ft Kier Property have acquired Arena Central New Under Construction: Developments, a joint venture led by Miller 335,000 sq ft Developments, in a deal worth £30 million. The undeveloped site comprises three plots: 150,000 sq ft Total Under Construction: at 5 Centenary Square; 200,000 sq ft at 4 Arena 1,405,260 sq ft Central; and a further 200,000 sq ft at 5 Arena Central – as well as the public realm at Bank Square. Key Developments 103 Colmore Row Three Snowhill One and Two Chamberlain Square Arena Central 07 Redefining our place | Birmingham Crane Survey 2019 2. Hotel, retail and leisure Hotel Birmingham: otel evelopment ipeline There was just one new start in the hotel sector in No. of rooms 2018, bringing the total number of schemes under 600 construction to three which are set to deliver 443 rooms. The Royal Angus Hotel, St. Chads Queensway, 500 is undergoing a major refurbishment including a two- 400 storey extension creating 93 additional rooms. 300 Although there were no completions in 2018, delivery 200 in 2019 is expected to be strong, with the highest number of beds added in the city since 2013. Unite’s 100 hotel-led mixed-use scheme is set to complete early 0 Q1 2019, offering 170 rooms alongside new conference 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 and office space. The flagship completion for 2019 Completed UC 2008-2018 average is set to be the prestigious Grand Hotel, which will provide 180 rooms. Source: Deloitte Real Estate Looking ahead beyond 2019, development pipeline remains healthy with various plans to further increase hotel capacity within the city. This includes proposals to convert listed buildings, extend existing structures and make purpose-built units. Plans are emerging to transform the current House of Fraser store on Temple Row. The Landlord, Legal & General, has submitted a major planning application to create a 200 bedroom hotel, 365,000 sq ft of office space, 60,000 sq ft of retail space, plus an additional 33,000 sq ft of restaurants, bars and cafes. 08 Redefining our place | Birmingham Crane Survey 2019 Retail and leisure Retail and leisure development activity remains Key Statistics subdued across the city, with only one new start in the leisure sector, the Birmingham Hippodrome Completed 2018: extension.