Birmingham City Centre Pushing The Boundaries As Residential Values & Office Demand Rise

News
24/04/2018

The traditional boundaries of Birmingham city centre are being pushed in new directions, according to Savills, as 31% growth in average residential values since 2013 has improved the viability of complex sites and strong commercial occupier demand is encouraging developers to look beyond the historic core.


The firm’s Birmingham: Delivering Transformation report highlights a diversification in city centre residential development, not traditionally a focus for major housebuilders, with 21,200 residential units in planning or under construction, of which 1,800 are build to rent. Housing also remains relatively affordable with the average house price 7.2 times the average salary compared to 16.6 times in London. While Savills says house price growth will be subdued in Birmingham for the rest of this year, five year compound growth of 14.8% will be in line with the UK average of 14.2%, and will outperform London and the South East (7.1% and 11.5% respectively).


Joe Shorney, head of residential development sales in the Midlands at Savills, comments:

“Increasingly, we have seen investment from specialist and historically London-centric developers such as Berkeley and Galliard looking to Birmingham to capitalise on the continually growing market. This influx of developers and institutional funders to the city centre is creating increased confidence and resulting in boundaries being pushed, with local and regional house builders looking for opportunities in the areas beyond the city centre.”


The local authorities that surround the city will need to play a role in absorbing overspill demand, says Savills, particularly for family housing which makes up 54% of requirements. Birmingham’s current Strategic Housing Market Assessment (SHMA) sets housing need at 4,057 new homes per annum, though just 1,750 were delivered in 2017 and the city’s population is projected to increase by 150,000 (13.7%) by 2031.


In the office market, city centre take up reached more than 1 million sq ft for the first time in 2017, 51% above the 10-year average. While there is circa 600,000 sq ft of speculative commercial space under construction, encouraging occupier requirementsand a shortage of developable sites in the traditional city core is driving developers to look beyond the former inner ring road into previously fringe areas, such as the emerging tech and creative hub in Digbeth. Further out, Savills highlights the link between the city centre and Birmingham Airport as a key corridor for growth.


John Griffiths, head of development at Savills Birmingham, adds:

“Commercial property growth beyond the historic core is likely to continue over the coming decade, shifting both to the east and west, for example the proposed 1 million sq ft Axis redevelopment adjoining Arena Central. Innovation and flexibility in funding, tenure and design is bringing forward complex sites, resulting in the highest level of construction activity since the Global Financial Crisis. As new areas emerge, this will create pockets in which growth rates are even higher than the average across the region.”