Birmingham is embarking on an unprecedented construction spree as it bids to meet record demand from financial services firms flocking to the city. The skyline of the city will be transformed, with over 1 million square feet of office construction planned to be completed from 2017[i].
It is part of Birmingham’s plan to turn itself into a global financial services hub by 2030, competing with other major European cities for investment. Demand for office space has skyrocketed in the past 12 months, with Birmingham attracting some of the world’s biggest firms. 2014 saw the highest take-up levels in office space since before the recession, with £630m transacted in deals within the city centre, compared to just £70.5m in 2013 – an increase of 794%[ii].
Sir Albert Bore, Leader of Birmingham City Council, said: “This is an important part of our plan to turn Birmingham into a global city within 20 years. We’re investing on an unprecedented scale to entice businesses here, and the sheer scale of planned development is attracting financial firms from across the world. Birmingham is competing with international financial services hubs like Zurich and Frankfurt as it bids to bring even more global businesses to the city.”
HSBC is moving its ring-fenced banking operation to the city, joining record numbers of other firms who have been attracted to Birmingham by its transformation since 2010. The bank is forward purchasing the 210,000 sq ft 2 Arena Central site in central Birmingham – the city’s largest property deal since 2002. Work starts on 2 Arena Central this summer and HSBC will occupy the site from early 2018.
Young professionals are also flocking to Birmingham, with 5,480 Londoners in their 30s moving there last year alone – the highest of any regional city. Greater Birmingham is also attracting more FDI projects than any other region, and a record number of foreign firms invested in the area in 2013/14.
The record levels of office construction are an integral part of Birmingham’s bid to attract global BPFS investment, with the city aiming to replicate the success of Canary Wharf. Greater Birmingham is already the largest regional financial and professional services hub in the UK, employing nearly 220,000 people in over 21,000 companies, and bringing £15 billion into the region. And the city says it can help ease the burden on London as a financial centre by encouraging London-based firms to expand into Birmingham – as Deutsche Bank did last year.
Neil Rami, chief executive of Marketing Birmingham, the city’s inward investment agency, commented: “Birmingham has worked incredibly hard to transform itself into a prime destination for financial and professional services firms. Those firms demand and need world-class office space, and the city is providing that on an unprecedented scale. We have affordable and smart Grade A office space here, in a city that will be at the heart of HS2 and has invested record amounts improving its transport infrastructure. The private sector here is rising faster than any other part of Britain, and that is also a big draw for financial firms. We are consistently creating more start-ups than any other regional city, and Birmingham is rapidly being transformed into a global hub for enterprise and innovation.”
Construction will be centred around the Colmore Business District, with the city’s £600 million Snow Hill Masterplan adding skyscrapers and transforming the skyline of the area. Work is due to start on the 400,000 sq ft Three Snowhill building – which will offer new Grade A office, retail and leisure space – while the first phase of Paradise, the £500 million regeneration project located nearby, will see 330,000 sq ft of speculative office space delivered in 2018.
Birmingham was recently named the most investable city in the UK by international real estate experts PwC, and the city has the largest range of commercial property investment opportunities available anywhere in Britain. Birmingham has the most affordable Grade A office space of any major British city, according to CBRE, with operational costs up to 55% cheaper than London.
Martin Guest, managing director of the Birmingham office of CBRE, said: "Birmingham city centre has a significant number of major construction projects underway at the moment. While the end is in sight for major infrastructure projects such as the New Street Station upgrade and the Metro extension, commercial development projects such as Paradise and Arena Central are now coming on stream and the city centre residential market has been reignited after seven tough recessionary years.
"The short-term disruption caused by these construction projects is more than outweighed by the sense of excitement they are generating locally, nationally and even internationally - investors from around the world are showing interest in the city not only because property is good value here, but because of the upturn in the city's fortunes, evidenced by the high levels of new build underway."