Greater Birmingham takes flight

It was a long time coming.

When the West Midlands agreed its devolution deal with the chancellor this week it was the culmination of years of somewhat fraught negotiations over how best Birmingham and its neighbouring authorities can band together to take on devolved powers from Whitehall.

Greater Birmingham has been lagging behind many other city regions in the pace of devolution, agreeing only in July to form a combined authority that brings together seven councils across the subregion.

But recently the pace has quickened, as the city leaders saw other areas - including the North East, plus Sheffield and Leeds - seal deals with George Osborne.

Now Birmingham has its own deal, which has been trumpeted as the most valuable to date, with the government agreeing to hand over £1.2bn in spending power over the next 30 years. The city region leaders hope the deal will be just the start of a devolution process that will see the West Midlands take on further powers that will help drive Brum’s economic revival.

The deal certainly comes with the West Midlands property market in good shape, with a range of headline occupiers signing up to the city in recent months - and many in the region think Birmingham is now well placed to build on recent progress. Paul Kehoe, chief executive of Birmingham Airport, argues that Birmingham is primed for growth - and is already benefiting from rising costs in London, both for office occupiers and employees, who are facing ever-spiralling housing and commuting costs. Kehoe says the dithering over a solution to South East airport capacity is also favouring Birmingham and argues that “a distributed network airport model pays greater benefit to the UK”, rather than concentrating airport capacity in the South East.

“Sir Howard Davies [the academic who chaired the UK Airports Commission] made his recommendation in favour of another runway at Heathrow, but that is 15 years off,” says Kehoe. “So what are we going to do right now on a Monday morning? Birmingham is seeing the benefit of that delayed decision and people are looking at us as an opportunity.”

On the rise

Kehoe says Birmingham airport is on a roll after £40m was invested on a runway extension in spring last year, with more than 5,000 Chinese tourists visiting the UK via the Midlands in the last 12 months. “We had American Airlines this year and Qatar flying eastbound. We were the first airport outside London to fly to China and have been doing so for two years. We have attracted another 11 airlines this year alone, to make 55 in total.” Others also like what they see. Deutsche Bank, which is employing around 2,000 people at its new offices in Birmingham city centre, is rumoured to be making a 45% cost saving by moving staff out of London. It is also believed that it considered several non-UK locations, including Dublin, before settling on the West Midlands. “These are big numbers and I would be amazed if it does not make people think: ‘Deutsche Bank has done it; shouldn’t we be doing it as well?’” says Jan Thompson, regional chairman of JLL in Birmingham.

Perhaps the same calculations applied for the Hong Kong and Shanghai Banking Corporation (HSBC), which is moving its retail banking branch to the city. It is a move back to its Birmingham roots for a chunk of the group, as the HSBC scooped up the Midland Bank in 1992, dropping the name seven years later. Then there is the decision of HS2 to locate 1,500 skilled engineers in the city at Snowhill 2 in Eastside, with thousands more jobs in the supply chain eagerly anticipated. This was hailed as the largest-ever public sector relocation to Birmingham, with Sir Albert Bore, leader of Birmingham council, welcoming HS2 “as an important step in rebalancing the country’s economy”.

To coincide with the news, the government gave the go-ahead to a £128m scheme to take the Midland Metro to Adderley Street, in Eastside, to deal with the increased number of commuters. This will open in December.

HS2, Deutsche Bank and HSBC are major wins for the city, but they are not the only ones. Chicago-based hydraulic engineering firm HydraForce is to double the number of its employees to more than 500. It is expanding its manufacturing facility in Aston, three miles from the centre, by 70,000 sq ft after agreeing a deal with the freeholder, the Homes and Communities Agency. German energy provider Extra Energy Supply moved to the centre of the city, employing 500, as has international law firm Hogan Lovells.

Monarch Aircraft Engineering opened a 110,000 sq ft maintenance hangar at Birmingham Airport, which will complement the company’s existing operations at Gatwick, Luton and Manchester. Spread over 2.5 acres, it is one of the first maintenance hangers to have the capacity for the Boeing 787 Dreamliner.

“The HSBC decision was interesting because it was predicated on where the bank’s customers were, how to access them and how it could provide the most efficient service,” says Neil Rami, chief executive of Marketing Birmingham. “If you look at the small-business loan book for HSBC, it is larger in the West Midlands than it is for the whole of London.

“When Deutsche Bank first had an office here it was very much a back-office operation, which London has decanted to many regional cities. But Birmingham is becoming a front-office operation as well. Deutsche Bank now has investment trading here as well, with around 150 dealers."

With increasing numbers of Londoners abandoning the capital - 58,000 aged between 30 and 39 left between June 2012 and June 2013, according to the Office for National Statistics - Birmingham has been the biggest single beneficiary, attracting around 5,480.

“These decisions are down to infrastructure issues: people can get affordable housing here,” says Rami. “Should they choose to live in or outside the city, the commute is so much easier and their spouse or kids can also have a career choice in Birmingham or the wider West Midlands. That is not necessarily the case in London and the South East.”

In September, Birmingham’s £600m investment in New Street station was completed, considerably improving the first-impression public face of the city. But Rami makes another point: “Obviously, we have a new station at New Street and HS2 and all that, but we are also planning for the future: most importantly, we are taking swathes of land out of the green belt for both employment and housing needs.”

He adds: “But it is not just people making these decisions; money is making these decisions, too. We now have 1m sq ft in office development in the city centre and just over £1bn is being spent here.”

Justin Quibell, associate director of Cushman & Wakefield, reckons there is 180,000 sq ft available in new grade-A space in Birmingham, with the same in refurbished grade-A space, and again in grade B.

The investment in infrastructure to the east of the centre will have a direct impact, not least at Snowhill 2, where the HS2 staff will be housed in 18 months’ time in 210,000 sq ft of an 800,000 sq ft site.

Other offices coming on stream include Paradise Circus (350,000 sq ft), the first phase of which is to be delivered in the fourth quarter of 2018; 103 Colmore Row (200,000 sq ft), by Sterling and Rockspring in a joint venture, has a 2018 completion date; 55 Colmore Row (150,000 sq ft), by IM Properties, will be a refurb and new offices; and 2 Cornwall Street (130,000 sq ft) will be a grade-A refurbishment available next year through Burntwood, the Manchester-based managed office space provider.

The 240,000 sq ft former office of the Birmingham Post and the Evening Mail is out for funding and could be completed in 2017, according to Quibell. On the doorstep of HS2 at Eastside Locks, the Goodman Group is developing an 11-acre regeneration site in a 10- to 12-year project on land owned by the city council and the HCA. It will result in 800,000 sq ft of office space, ground-floor retail, bars, restaurants, student accommodation, a hotel and homes.

Around the airport, and the nearby NEC, there is also huge potential. “The airport is more interesting than HS2 in that it is actually here,” says JLL’s Thompson. “HS2 is still a long way off and I have never come across any occupier say: ‘We are coming to Birmingham because of HS2.’ That is not to say that they won’t, but I do not hear it at the moment.”

A 20km area around the airport - dubbed UK Central - has been proclaimed an inward-investment hot spot by Solihull council. The idea is to unlock land to create low-rise commercial, logistics and manufacturing support for the companies already based there: the NEC, the £150m Resorts World Birmingham casino complex, which opened last month, and Jaguar Land Rover. A proposed HS2 station will serve this economic hub. “This is a once-in-a-generation opportunity to link the NEC, the UK’s largest casino and a thriving regional airport, that is already on a major railway line, with the HS2 station, which is 40 minutes from London,” says Kehoe. “There is no other location like this in the UK, nor is there likely to be for the next 10 years. You could draw a comparison with Airport City Manchester, but that is on a branch railway and does not compare to what is available here. It is a phenomenal opportunity.”

For Kehoe and many others, Birmingham’s renaissance has some way to run yet.

Source: Property Week

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