Developments on the rise

Construction activity in the residential and office sectors have “picked up pace” in Birmingham, according to Deloitte’s latest Crane Survey.

The annual Deloitte Regional Crane Survey monitors construction activity within four cities, including Birmingham, across a range of sectors including offices, residential, hotels, retail, education and student accommodation.

Now in its 20^th year, the latest Birmingham Crane Survey shows the number of projects which broke ground during 2021 almost doubled to 18 compared to 10 in the previous survey. Ongoing activity remains on a par with 2020, with 34 schemes currently in development.

 The 18 new starts recorded in this survey are split across four sectors: 14 in residential, two in office and one each for student housing and hotels. There were no new developments within the education or leisure sectors and for the third year running, no standalone retail schemes were started.

“Following a subdued 2020 where activity remained resilient in very challenging conditions, construction levels across the city have picked up pace as we see a return in developer confidence,” said Edwin Bray, partner in Real Assets Advisory at Deloitte and author of this year’s survey (pictured left).

“Development levels vary across the city with activity concentrated in two sectors. It has been an exceptional year for both residential and office developments within the city centre, accounting for 16 of the 18 new schemes.

“However, in many ways, the story is as much about developments in Birmingham which are not covered by the Crane Survey as those that are.

“As development opportunities are taken up in and around the city centre, particularly for residential use, we’ve observed more schemes just beyond our Crane Survey search area and across the wider conurbation.

“Major developments linked to the Commonwealth Games sit outside of the survey’s boundaries, which is where we are seeing higher levels of activity across all sectors. Once the Games have taken place, we should see additional activity with some projects set to be repurposed, bringing new leisure, hotel and mixed-use schemes.”

The residential sector continues to go from strength-to-strength. New schemes have increased by over 250% with 14 new schemes breaking ground in 2021, compared to just four in 2020.

“The residential sector once again dominates the Birmingham skyline as 14 new schemes broke ground. Whilst new developments span the breadth of the city, there has been a noticeable increase in the number of developments in the Jewellery Quarter with both Southside and Westside also having a good number of schemes underway,” Mr Bray added.

Despite initial predictions in the 2020 Birmingham Crane Survey that 2021 may have been another record-breaking year for the sector, surpassing the 2,072 units completed in 2020, the volume of units delivered fell by 26 per cent to 1,520 units.

Mr Bray added: “The ongoing pandemic coupled with supply issues, restricted availability of materials and labour shortages have all contributed to delays in the completion of some residential schemes. However, the sector could return to record-breaking levels in 2022 as delayed projects complete.

“Demand for build-to-rent schemes and the private rental sector remain strong and developers have responded to the need for a mix of high value apartments alongside more affordable and family housing. Developments on Great Charles Street, Broad Street and Southside will significantly increase the number of build-to-rent units in the city over the coming months.

“Looking ahead, the pipeline is strong both within and outside the boundaries of the Birmingham Crane Survey. Development opportunities in the city centre continue to attract strong interest from both UK and international investors, with planning application levels remaining high for both small and large-scale developments.”

Following a slightly muted year in office activity during 2020, there was almost a four-fold uptick in the volume of new office space delivered in 2021 to just over 750,000 sq ft – close to the record-breaking levels seen in 2019 of 775,000 sq ft. In total, four schemes completed in 2021 including 3 Arena Central and 103 Colmore Row.

However, following five consecutive years of floor space being developed exceeding one million sq ft, pipeline activity has almost halved, with just over 600,000 sq ft under construction, below the annual average of 765,810 sq ft.

Mr Bray added: “The fall in activity is inevitable given the geographical boundaries of the Birmingham Crane Survey area. Opportunities for new build and office regeneration projects are becoming rare which is reflected in the pipeline; however, office development is strong across other areas of the city.

“Demand for Grade A office space continues its upward trajectory with investors and developers continuing to compete for key, strategic sites. However, this is a crucial time for developers as the demand for more flexible office space to accommodate hybrid working patterns and fluctuating space requirements continues to increase.”

There are four office schemes currently under construction including two new starts - Enterprise Wharf in the Gun Quarter and the remodelling of 10 Brindleyplace. The Smithfield Birmingham development reached another key milestone in 2021 as Lendlease and Birmingham City Council agreed its joint venture with final planning due later this year.

Arup’s agreement to occupy 68,479 sq ft at One Centenary Square is the largest deal to complete in the city in 2021. As companies look for more flexible lease options, Goldman Sachs opened its regional hub on Colmore Row and is now reportedly doubled their space requirement to around 100,000 sq ft in Birmingham.

Outside of residential and office, it has been a mixed picture for other sectors, some which have seen little or no activity.

Following a record-breaking year in 2020 for purpose-built student accommodation (PBSA) in Birmingham, 2021 has seen a 72 per cent reduction in activity, with just 399-beds completed in 2021 compared to 1,458 the previous year.

All of the new bed spaces came from Upper Dean Street in Southside. Only two schemes are currently under construction, with no new developments on the horizon within the Crane Survey’s research area, although activity is taking place further afield.

For the second year running, one hotel completed in 2021 delivering 195-beds, and one new hotel breaking ground. For the third consecutive year there are no new retail schemes or any in the pipeline as developers continue to focus on mixed-use schemes which include retail units.

Mr Bray said: “Issues around viability and sustainability will continue to make new, standalone retail developments hard to stack. The shift pre-pandemic towards repurposing secondary retail property rather than adding to supply will remain.

“2022 will be a standout year for Birmingham on many levels. Construction activity across the whole of Birmingham will continue and the Commonwealth Games will bring much needed tourism and a boost to the hospitality sector.

“The Commonwealth Games presents a once in a lifetime opportunity and couple this with the prospect of HS2, the extension of the tram network and infrastructure changes which form part of the region’s levelling-up agenda, we can definitely say it is Birmingham’s time to shine.”

The Birmingham Crane Survey is one of four Deloitte Regional Crane Surveys to announce its construction activity today. Belfast, Birmingham, Leeds and Manchester have collectively recorded 72 new projects beginning construction in 2021, compared to 53 in 2020.