Occupier Demand in the West Midlands

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Charles Toogood, Principal and Managing Director for National Offices and Lease Advisory Team, Avison Young, discusses factors impacting occupier demand in the West Midlands. 

This article was written for the Birmingham Economic Review 2023. 

The review is produced by City-REDI / WMREDI, the University of Birmingham and the Greater Birmingham Chambers of Commerce. It is an in-depth exploration of the economy of England’s second city and a high-quality resource for informing research, policy and investment decisions.

Occupier demand quickly recovered post-pandemic, with the West Midlands and Birmingham showing encouraging demand for office space. Average annual take up in Birmingham post-pandemic totals some 670,000 sq ft, 20% lower than the pre-2020 five-year average.

This fall is a direct consequence of agile or remote working, with occupiers downsizing and typically taking 20 to 30% less space than previously. However, return to office is trending upwards with many occupiers mandating a 2 or 3 days-a-week minimum return.

In the drive to encourage staff back to the office for corporate culture, staff engagement, serendipity and productivity, occupier demand continues to focus on best-in-class accommodation, well served by on-site amenities including health and well-being facilities, coffee shops and concierge services more akin to the hotel market. Well-connected buildings close to transport modes demonstrate the highest demand, through the continuation of urbanisation and centralisation away from suburban office centres.


Inward investor occupier activity has been more subdued post-pandemic, with the regional cities suffering as a consequence.  Larger South East-based occupiers that historically may have sought locational resilience through partial regional relocations have in part been constrained by legacy lease events but are also unsure about their special requirements given the workforce’s desire to work from home at least part of the week. With the exception of limited examples including Goldman Sachs, who recently committed to Birmingham ahead of Manchester for their software division, demand remains subdued and it remains to be seen when a recovery will occur. Automation, particularly in the banking sector, coupled with remote working has also seen many of the larger banks downsize their regional operations and this trend is set to continue.

Active sectors have been typically represented by the public sector, financial and professional services looking for best-in-class accommodation, and educational users alongside business services.


Across the UK, the flex office sector has been a significant driver of demand for office space since 2019.  Birmingham and the Midlands are no exception and the countercyclical nature of the market, shows strong performance in subdued economic conditions, through occupiers’ reluctance to sign up for longer lease commitments. Smaller occupiers requiring typically less than 5,000 sq ft continue to be attracted to the lifestyle offer and on-site amenity provision, without the need to fund expensive office fit-out. This trend towards flex space is forecast to continue, with many corporate occupiers predicted to have a third of their space in flex offices by 2030.


Demand for office space is also focused on sustainable buildings, that offer low carbon in construction and operation, with low energy and running costs. Sustainability is now in the top three search criteria for occupiers when looking for an office.

Build cost inflation has continued at a significant pace and whilst rental growth has been robust, it has not kept pace with build cost inflation. Market bifurcation has emerged, with strong demand for best-in-class space driving rental growth, with Birmingham seeing 20% growth in headline rents over the last 4 years, whereas less prime accommodation has seen nominal growth over the same period. This emergence of a two-tier market is likely to continue, until brand-new grade A ‘super prime’ accommodation declines in availability. At the time of writing, peak headline rents for central Birmingham are £41 per sq ft,  with further growth anticipated over the course of the next three years, with Avison Young forecasting peak rents at £45 per sq ft by 2027.


In the property investment market, given the persistent inflationary indicators and interest rate rises over recent months, with higher borrowing costs and debt maturity on the horizon, capital values are continuing to fall with prime yields in Birmingham having moved out from 5% to 6% over the last 12 months. As interest rate rises stabilise, the bottom of the market and price transparency will emerge. Softening yields and higher borrowing costs are also impacting the scheme viability, with many development projects whether new or refurbishments being shelved until such time as the metrics including the flattening of build cost inflation start to improve.  However, the current paralysis in activity will likely see an improvement in Quarter 2 of 2024.

This blog was written by Charles Toogood, Principal and Managing Director, National Offices and Lease Advisory Team, Avison Young.

The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI / WMREDI or the University of Birmingham.

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