Rents slashed in Birmingham office space battle
Sep 10 2008 By Alun Thorne, Head of Business
Competition to fill some of the increasing amount of empty office space in Birmingham city centre has seen one key scheme slash its rents by more than 10 per cent.
Rents at 35 Newhall Street, which last year underwent a major £7m refurbishment, have been cut from £28 per sq ft to £25 per sq ft - the current headline rent in the city is £32.50 per sq ft, which has been achieved for a number of lettings in the city.
Theo Holmes, from CBRE, joint agents with KWB, admitted that the owners of the building have reduced the rent in order to generate more interest in the building.
He said: “35 Newhall Street is one of the best examples there is in Birmingham of affordable, high spec accommodation located in a prominent city centre location.
“The owners recognised that to increase the building’s competitive advantage, a rent reduction of £3 per sq ft was the sensible approach to secure the first tenant.
“This revised rent compares very favourably to buildings of the same specification in Birmingham and as such we are expecting occupier interest to increase significantly.”
Competition for potential occupiers has become particularly intense in recent months as the economic downturn has seen relocation fall down the list of company priorities.
In contrast Birmingham is now seeing a significant amount of grade A space come into the market with hundreds of thousands more square feet currently in the pipeline.
A number of large lettings this year, including Wragge and Co and Barclays to Snowhill and Deutsche Bank to One Brindleyplace, have actually seen an above average amount of take up in the city office market, but developments like 45 Church Street, Baskerville House and Colmore Plaza as well as 35 Newhall Street are now desperately searching for occupiers.
The issue is likely to be further compounded when other schemes come into the market such as The Cube and Arena Central.
Mike Loftus, manager of Locate in Birmingham - the organisation tasked with attracting inward investment into the city, said there was traditionally a reluctance to reduce rents and the reality was that occupancy costs already tended to be considerably lower than the quoted rent.
He said: “It has to be said that this is very much a UK phenomenon as on the continent you will find rents going up and down as the market dictates but there is no doubt that the agency community is hesitent to reduce rents.
“What tends to happen is that the impact is softened for the occupier with things like rent breaks and fit outs costs being absorbed by the owner. There is a lot to resistence to actually reducing rents but what you find is that through different methods occuppier costs are reduced. The resistence also comes from the owners of developments who are often large institutions who have more complex financial reasons why not to bring rents down.
“If you speak to some developers they firmly believe that you should state a headline rent and stick with it so that everybody knows where they stand but that changes from scheme to scheme.”
