Pictured above: (l-r) Philippa Pickavance and Jill Astley of Drivers Jonas Deloitte Midlands

Eight new developments under construction in Birmingham city centre this year show a rise from six new construction starts last year, reports Drivers Jonas Deloitte in this year's annual Birmingham Crane Survey.

The research found that similar to 2008-9, development activity in the city remains diverse with only one of the new starts comprising an office scheme. Other new starts include three residential schemes, one student accommodation scheme, one retail-led mixed-use project, a large public sector development (Library of Birmingham) and the redevelopment of Edgbaston Cricket Ground. However, despite the encouraging number of new starts, there is a third less office space and a fifth less residential space under construction compared to this time last year.  

"This year's Crane Survey is more encouraging than many, including ourselves expected," commented Jill Astley development director for Drivers Jonas Deloitte Midlands. "Birmingham has proven to have some resilience with eight new construction starts and a diverse range of schemes underway. Public funding has proven vital to this, even with schemes not directly delivering public sector space. The HCA's Kickstart programme in particular has been a fiscal instrument of key importance for all of the new residential schemes which the survey has identified, unlocking financial viability issues and helping stalled schemes get back on track. Construction activity is evident again in the city centre and that is hugely encouraging as we look towards future growth."

Office development has continued to slow as predicted in the 2009 Crane Survey with only one new office start - the 196,000 sq ft scheme being constructed by Thomas Vale at Woodcock Street in Aston.  Scheduled to complete in 2011, the largest office transaction in the city in 2009 is being developed on behalf of owner occupier, Birmingham City Council. The only other new office space identified by the research forms part of the new mixed-use Tesco scheme on Icknield Street which will include 1,920 sq ft of office space.

A total of 182,270 sq ft of office space will be delivered this year across four schemes with the majority situated within The Cube which will deliver 110,000 sq ft of offices, around half of which has already been occupied by the Highways Agency. Although a further 352,300 sq ft of office space is under construction in Birmingham city centre, only 127,000 sq ft is still available.  

"The fact that we are seeing a relatively small amount of new space delivery to the market this year is not a bad thing," commented Philippa Pickavance, director and head of agency for Drivers Jonas Deloitte Midlands. "With around 1.2 million sq ft of Grade A office space still available out of a total stock of 17.04 million sq ft, and 3.4 million sq ft of vacant office space, we believe this will mean no new speculative office building in the city for a number of years, with continued poor demand for space at all levels. However on a positive note, the city does have a good mixed grade stock to offer occupiers who are in the market."  

Take-up in the city is off to a reasonable start for 2010 with 183,400 sq ft transacting in the first quarter, 51 per cent up year-on-year. Take-up was again dominated by a few larger deals and then many smaller deals, including the Office of Legal Complaints committing to two floors (46,000 sq ft) of space at Baskerville House this quarter.

Due to market pressure, 2010 has continued to see headline rents decline and incentives increase. Headline rents on top grade A space are holding between £25 and £27.50 per sq ft, with a substantial variety of additional grade A space available for between £18 to £25 per sq ft. Reasonable second hand accommodation ranges from £12 to £18 per sq ft.

The research also highlighted an emerging trend in rising demand for D1 educational use in office accommodation, representing some 16 per cent of the Q1 2010 take-up compared with only six per cent in 2009.

In the residential market, activity has picked up this year with three new starts. Delivery volumes however remain much reduced with 456 units completing in 2010 and 334 scheduled for 2011. All of the residential starts are situated outside of the city core and have been supported by public funding through the Homes and Communities Agency's Kickstart scheme. They comprise The Quarter by Morris Homes in the Jewellery Quarter, Zone 8A of Park Central, and Persimmon Homes' Abode Birmingham on Charlotte Road which will comprise 100 per cent of houses in this phase. Kickstart funding has also seen Masshouse return to the Crane Survey following the development's stall in 2009; the 167 apartments are now scheduled to complete in early 2011.   

In addition to traditional office and residential developments under construction, the research also highlighted the diversity of projects underway in Birmingham city centre, the most high profile being the new £188 million Library of Birmingham, due to complete in 2013.  Student accommodation continues to rise in Birmingham with the survey identifying a new scheme on Bagot Street near Lancaster Circus due to complete in 2011 which, together with the Jennens Road scheme identified in last year's survey, will provide almost 2,000 student bedspaces in the city centre.  Work has started on Edgbaston Cricket Ground's new stand with permission also granted for an adjacent mixed-use scheme which has yet to get underway. Construction is also underway on the new mixed-use Tesco development on Icknield Street, this will include four additional retail units, a small office element and six apartments.

"As developers seek to maintain profitability and with financing remaining tight, we expect to see more non-traditional and mixed-use developments such as those identified in this year's survey coming forward," commented Jill Astley. "Despite long planning and lead-in periods developers must remain as flexible as possible to capitalise on niche opportunities and changing market conditions, and the delivery of more varied schemes is likely to result from this.  It also remains to be seen what impact the amended Big City Plan will have on the city centre when it is released in September, how the incorporation of High Speed 2 will affect future development in Eastside.   

"Looking forward, we do not foresee any speculative construction starts for purely private sector office schemes during the next two years, although small office elements may be incorporated into larger mixed-use schemes.  The unlikelihood of future Kickstart or public funding means solely apartment based schemes are also improbable. The economy's big focus is debt finance and borrowing and, with construction activity being a highly visible indicator of lending and market confidence, it is hoped that recent public sector support in Birmingham has stimulated enough confidence in our city to keep its development moving forward."

For more information about Drivers Jonas Deloitte, please visit their website here: www.djdeloitte.co.uk