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22 June 2009
Six new construction starts in Birmingham over the past 12 months signal development is still happening in the city, albeit at a reduced level from that experienced previously, reports Drivers Jonas in this year's annual Birmingham Crane Survey.
The research found that activity is more diversified this year with developments with a high residential content accounting for only 6 of the 12 projects under construction, compared with 14 of the 21 projects in 2008. Highlighting the difficulties experienced in the residential sector, three key Birmingham schemes have been put on hold since 2008's survey.
The second phase of Masshouse stalled when David McLean went into administration, although selection of a new contractor took place earlier this year.
Work has not commenced on the second phase of Newhall Square after completion of the first phase (a Travelodge and 10,900 sq ft of offices) and the planned residential development is expected to be switched to an office scheme, dependent on a pre-let.
Work on the residential and hotel elements of Snowhill has also been on hold.
On a more positive note for the development sector, there are a number of large public sector development projects in the pipeline that are currently being worked up, with construction starts expected over the next 12-24 months.
Major projects including the £193m Library of Birmingham, £600m redevelopment of New Street Station and the £1.5m Jewellery Quarter public square, could all contribute to a rise in future crane activity.
With Drivers Jonas' recent Office Trends Occupier Survey also highlighting that office take-up is unlikely to meet the 1m sq ft record of last year, development of speculative space has also slowed.
The Crane Survey recorded just two new office starts: Two Snowhill and Langley Point.
Both are designed to BREEAM 'Excellent' standard.
Of the two only Langley Point, a self-contained 44,500 sq ft office building, is nearing completion while Two Snowhill, which was due to complete by Q4 2010, has now agreed a delayed delivery in 2012 with its substantial pre-let occupier Wragge & Co solicitors.
Snowhill is being developed by Ballymore Properties and will upon completion deliver 560,700 sq ft of office space and 20,000 sq ft of retail.
KPMG took a pre-let of 120,000 sq ft at One Snowhill in 2006 and Barclays Bank secured 100,000 sq ft in the third quarter of 2008.
Both are currently undertaking their internal fit-out.
At Two Snowhill, the Wragge & Co pre-let of 256,000 sq ft has an option to drop two floors within an agreed time-frame.
The residential and hotel phases of the development are currently on hold.
Philippa Pickavance, head of agency at Drivers Jonas in Birmingham, said: "The office pipeline delivery for 2009 and beyond, including the office elements within mixed-use schemes, totals 994,600 sq ft.
This is the largest volume of construction since our Crane Survey records began in 2002.
However, 57 per cent of this space is already let, leaving just 431,900 sq ft coming on to the market to lease.
This actually falls to circa 385,400 sq ft if the surplus available space at Two Snowhill which will now not complete until 2012 is discounted." No new office schemes are expected to start in the next 12 months (unless a pre-let is secured) and the reduced pipeline going forward should thus redress the short-term over-supply in the city.
The survey also found that perhaps unsurprisingly no new residential schemes have been started this year. Cranes remain on some existing schemes with residential elements but the number of units completed this year should be about half the long term average experienced since Drivers Jonas first began the survey series in 2002.
Schemes with apartments that continue are Latitude, Sinope, Kenyon Forge, The Cube, and St Paul's Place.
This will result in 514 completions for 2009, and 412 for 2010. Crane activity in the city this year highlighted more diversified activity in Birmingham but unlike the rest of the UK, the city has not experienced a significant shift towards student housing. Only one student accommodation scheme was identified by the survey - 1,300 units under construction at Aston University's campus - but this is an on-campus development and is at least partially to replace some older blocks that will ultimately be demolished.
With strong student numbers in the city and university applications on the rise it would not be surprising if future surveys highlighted more student-related projects.
Jill Astley, development partner at Drivers Jonas in Birmingham, concluded: "This year's survey is encouraging, showing that development activity is still happening in Birmingham, but at the same time providing a strong signal that the 2010 Crane Survey results could for the first time include solely public sector led projects.
With £6bn already committed by the public sector, it is realistic to expect development in this area to continue despite tougher market conditions; this will be vital to maintain construction momentum in the city.
If present conditions prevail, we believe it very unlikely that any new mainstream commercial or residential projects will emerge in the next 12 months, as both developer and financier confidence needs to return before the market will be able to sustain new private sector schemes."
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