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Birmingham City Council and Network Rail have begun plans on the fourth phase of their Snowhill office scheme. At present, they are working on plans to develop the UK’s largest office block outside London’s Canary Wharf. The development is well under way, with the already-completed first and second phases comprising two buildings totalling 850,000 square feet of office space, and a third phase where work has already started on site and which consists of a further 250,000 square feet of additional office space.
The fourth phase will potentially comprise a 10-storey office development of up to 1 million square feet of office space, developed above the NCP multi-storey car park at Birmingham’s Snow Hill station. At present, the plans are undergoing a feasibility study to assess whether such an office block could accommodate 500,000–1 million square feet of office space; if so, the building’s value could be close to £400 million.
This is not the first time Birmingham’s council has drawn up initial plans for the fourth phase of this scheme. During the most recent recession, there were plans for a very different scheme, which would see a 43-storey residential tower, and a 23-storey, five-star hotel occupy the site. However, with the combined increasing confidence from investors and occupiers returning to the region, along with a serious lack of Grade-A office stock available in Birmingham, the council is being drawn to this new office-led scheme.
The site itself, Snowhill, makes up one of the 26 sites of the ‘city centre enterprise zone’, designated areas which the government has highlighted as key areas of potential transformation. Birmingham’s council has taken this on and has launched the Big City Plan, a new initiative launched across Birmingham city centre and which will cover 2,000 acres of land, identified as areas of reform.
Lack of development is not just a big talking point in the regions though; West End office agents are starting to become increasingly worried about the lack of development coming through at the moment and are really starting to feel the pinch. Post-Lehman brothers crash the market was awash with new development into the market, with numerous pent-up new developments taking place; however the three or four years since Lehman brothers there has been almost no speculative developments in the West End and only a handful of pre-let developments coming to the market. This lack of development means West End vacancy rates hover at around 4.5% compared with the 9% in the City. In general, anything below 6% translates as a very strong landlord market in which the landlord can dictate terms accordingly – emphasising already the need for new Grade-A stock to be introduced into the market.
Alex Goode from Morgan Pryce believes landlords are already reacting to this situation: “The larger landlords such as the Crown Estate and Great Portland Estates are taking this lack of Grade-A office space in the market into their own hands by looking to redevelop and refurbish current buildings. On a number of properties within their portfolios across the West End these landlords are handing out very short terms – 1 year to 18 months – because of their plans to redevelop these buildings.”
This news was brought to you by Morgan Pryce, a specialist tenant acquisition agent with offices in Oxford Circus and the City. Morgan Pryce specialises in search, negotiation and project management and works exclusively for tenants.