Birmingham Crane Survey 2023
A time to be bullish
Key findings
Market summary
New starts in 2022 were once again driven by construction activity in the residential and office sectors. Of the 18 new schemes breaking ground in this year’s Birmingham Crane Survey, residential developments led the way with 13, followed by two office, and one each for the hotel, education and research, and student accommodation sectors.
2022 saw 43 schemes under construction compared to 34 in 2021. That’s an increase of almost one third and a sign that investors and developers continue to have confidence in the city and its economic future. Of these 43 schemes there were 33 residential, five office, three hotel and one each for student accommodation and education.
The retail sector continues to be muted with no new major retail scheme breaking ground for the fourth consecutive year. However, on a smaller scale, retail floorspace is being delivered across the city centre as part of active frontages to mixed-use schemes.
While the office sector only saw two new start developments in 2022, there was a significant increase in floorspace under construction taking it to 866,969 sq. ft. Although this represents a 40% increase from 2021, it does not quite approach the levels seen in 2020 of over 1m sq. ft.
Paradise Circus has heavily influenced the office floorspace figures over the last couple of years, with Phase 2 comprising of One Centenary Way still under construction and Three Chamberlain Square recently started.
The office market is undergoing significant change as a result of the COVID-19 pandemic, as developers design (and re-design) schemes to meet the increasing demand for Grade A floorspace, sustainable buildings, and workspaces that are flexible and collaborative.
The UK economy is now officially in recession. The Deloitte Economics Monitor is forecasting a record contraction in UK household disposable incomes per person in this fiscal year (2022-23) and the next (2023-24).
When coupled with high interest rates, high global energy prices and supply side challenges, the economic recession will potentially have the greatest impact on office development. Many organisations are already considering their office and estates strategies. However, it is probable that all sectors will witness some element of slowdown in investment.
While there is only one education and one student accommodation new start recorded in 2022, activity outside of the Crane Survey boundaries is strong as the city continues to attract significant investment and numbers of UK and international students to its leading universities. 412 student beds were delivered in 2022, with a further 472 under construction and more in the pipeline.
There has been one new start in the hotel sector in 2022, adding 155 rooms to the 731 already under construction. The pipeline across all sectors, with the exception of retail and leisure, remains strong with schemes either granted planning but yet to break ground, or going through the planning process.
A time to be bullish
2022 was a phenomenal year for the city and commenced a ‘Golden Decade’ of opportunity for Birmingham, as the Commonwealth Games catapulted the city and wider region onto a global stage. With the eyes of the world watching to see whether a city, undergoing significant regeneration, could deliver – deliver it did.
The Games has already contributed £870.7 million to the UK economy, with the West Midlands economy receiving a significant boost with over half of the economic impact, just over £450 million, benefitting businesses and communities across the region.
The city welcomed over five million visitors throughout its duration but its success will not only be attributed to the duration of the competition alone, but also reflected in the legacy of the Games and the city’s ability to attract inward investment, sustain tourism and build on its global reputation.
Now is the time for Birmingham to be bold. The Games put the West Midlands in the global sporting spotlight, and it is already reaping the benefits of its success.
Since the Games ended, Birmingham has been awarded two major global sporting events. In 2023 it will host the squash British Open, followed by the European Athletics Championship in 2026 – the first time it has been hosted in the UK.
The city’s sporting success is mirrored by business confidence in the region. The BBC has committed its future to the region with a move to a new, purpose-built broadcast centre at the former Typhoo Factory in the new creative quarter in Digbeth. The announcement followed the decision of the BBC and Shine TV to move the production of MasterChef to Digbeth Loc Studios from 2024, as well as Goldman Sachs’ decision to take 110,000 sq. ft of permanent office space at One Centenary Way as part of MEPC’s £1.2 billion Paradise Birmingham development.
All three deals sit within the boundaries of the Birmingham Crane Survey and signal significant investment in the city.
Record breaking
While construction activity surrounding the Games mainly sat outside of the Crane Survey’s boundaries, construction in the city centre continues to thrive.
The West Midlands has one of the highest housing targets in the UK – 16,500 per year – and a commitment to build 215,000 homes by 2031, therefore the residential sector must remain robust.
The pandemic, combined with supply chain issues, availability of materials and labour shortages, contributed to the delayed completion of some residential schemes, but has also led to a record-breaking number of residential units being delivered in the city in 2022.
2,398 homes came to market, up from 1,520 the previous year and surpassing the record-breaking 2,072 homes delivered in 2020.
The number of residential schemes currently under construction also increased by one third with 32 schemes, 13 of which are new starts, compared to 24 schemes the previous year. The 33 schemes will deliver 6,487 homes.
Moving forward, the residential pipeline is strong within the boundaries of the Crane Survey and further afield.
In addition to those currently under construction, 1,283 homes are onsite at demolition stage, with an additional 7,483 homes at the planning stage (comprised of 3,585 homes granted planning permission but not yet on site, and 3,898 currently going through planning).
Many schemes at planning stage are concentrated in Digbeth and the Jewellery Quarter.
The first affordable homes development at Perry Barr is still on track to be completed earlier than predicted in the first part of 2023, and a planning application for the highly anticipated Smithfield development was submitted in the New Year. Once complete, this will add another 3,000 new homes.
With a growing population, the demand for new homes continues. Birmingham’s population is set to grow considerably over the next two decades. Regardless of any economic hurdles that may lie ahead, investor confidence in occupier demand should be maintained.
Shift in focus
While the number of new residential schemes remained static this year, activity across the city centre remains high as the demand for luxury apartments and homes remains strong.
2022 saw a noticeable shift in the concentration of developments across the city centre. In 2021 there were nine active residential schemes in the Jewellery Quarter set to deliver 1,080 units. While the number of schemes has increased to 13, the number of units under construction has only marginally increased to 1,175.
There are currently four schemes underway in Digbeth, Southside and Westside (910 homes, 948 homes and 1,020 homes respectively), and three schemes in the Gun Quarter and City Core (708 homes and 582 homes respectively). There are two schemes in Eastside (1,144 homes).
Blackswan Developments’ £105m mixed-use Hockley Mills development in the Jewellery Quarter is on track to be completed in 2024 and deliver 395 properties.
Southside and the City Core saw sizeable developments cutting ground in 2022 - namely Makers’ Yard development and Octagon.
A significant number of new starts and current residential developments under construction are Build-to-Rent (BTR). This year, Glasswater Locks is the largest residential new start that is set to deliver 769 homes over 37-storeys. Watkins Jones Group’s Makers’ Yard development is the second largest new residential scheme and will provide 551 BTR homes upon completion.
Digbeth records the largest residential development to receive planning permission in 2022 – Goodstone Living’s ’Camp Hill Gardens’ – a residential-led mixed-use development set to create 550 new homes, in addition to flexible commercial floorspace when work starts onsite in 2023.
The demand for new homes continues to outpace supply. This coupled with investor confidence, has created an opportunity in the market to deliver an alternative tenure in BTR homes. For the first time investment in residential-led BTR schemes overtook commercial assets with just over £450m (47%) of deals recorded by the Investor Bulletin spread over five transactions. The largest recorded being One Eastside at £200m involving 667 apartments. The BTR sector now accounts for most new builds under construction.
Rising house prices in Birmingham, alongside the cost-of-living crisis, calls into question the affordability of new homes for the younger generation and may have a future impact as recent changes in lending rates make it harder for first-time buyers.
Scaling up
Residential schemes are on the rise, not only in the number of developments breaking ground, but also in terms of scale. Birmingham’s ever-changing skyline is reaching new heights as the demand for city living continues to thrive.
With premium space in the city centre becoming scarcer, and a sustained demand for large, well-located schemes remaining strong, there is only one way to go - and that is up!
With the completion of Moda Livings’, The Mercian, which stands at 42-storeys, City Development’s new, 49-storey Octagon build takes over as the highest building currently under construction in Birmingham and will change the skyline once again.
Once completed, Octagon will deliver 370 new homes and will be the world’s tallest, purely octagonal, skyscraper. The muted, 61-storey 100 Broad Street is still yet to break ground, but if it does within the next 12 months, it will become the city’s tallest building, surpassing the BT Tower and all other developments currently under construction.
However, it is not always height which makes a scheme distinctive. Birmingham’s industrial heritage is a unique selling point for many of the high-quality residential schemes considered as part of this survey.
Expectedly, the average height of developments in the Jewellery Quarter is five-storeys, reflective of its character and conservation area status. While schemes in Digbeth and the Gun Quarter are taller, all three areas have a distinctive built form and industrial character, which is retained through refurbishment and retention of higher quality buildings. Birmingham is proud of its industrial heritage and this unique trait is attracting investment.
A connected and sustainable city
However, for the city to continue to prosper and fulfil the Games’ legacy, it needs to continue investing in its transport infrastructure and become a fully connected city where people can live, work and spend their leisure time without needing a car.
The planned HS2 rail service will put Birmingham at the heart of the UK’s high-speed rail network and is already attracting significant inward investment to the area. HSBC and HMRC have recently relocated their headquarters to the city. Goldman Sachs’ decision in 2022 to take 110,000 sq. ft of permanent office space is testament to more businesses wanting to relocate to a city that is fully connected by air, rail and road.
Running through the spine of the city is Midland Metro’s tram system. It connects the wider West Midlands region, improves social mobility and makes it easier for people to travel to the city without the need of a car.
Starting from Wolverhampton, Phase two of the Birmingham Westside extension opened in 2022, further extending the line from the library tram stop in Centenary Square along Broad Street and through to Edgbaston Village.
The new extension connects Brindleyplace and Five Ways with the rest of the city, providing investors and businesses with viable options just outside of the City Core. This means investment and development in Birmingham city centre is no longer constrained to its core.
For the third consecutive year, two new office schemes began in 2022 – one new build and one major refurbishment, both located within the City Core.
Three Chamberlain Square is part of the Paradise Circus development where there is a significant pipeline of office space under construction. The first targeted net zero carbon development within the Paradise Masterplan, Three Chamberlain Square, will provide 185,000 sq. ft of office space over 10-storeys when it is completed in 2025.
The refurbishment at Citadel Chambers on Corporation Street is the second office development to break ground in 2022. It will deliver 46,000 sq. ft of refurbished floorspace when it is completed in 2024.
Following a substantial uptick in office space delivered in 2021, only one office scheme was completed in 2022 – Enterprise Wharf in the Gun Quarter which delivered 120,000 sq. ft.
Following a year where office space under construction fell significantly, levels have returned in 2022 with over three-quarters of a million sq. ft currently being developed across six schemes – much of the activity concentrated in the City Core and Westside. Of the office floorspace under construction currently, 600,000 sq. ft is due to be delivered in 2023.
The Future of Work
The demand for flexible office space to accommodate hybrid working patterns and fluctuating space requirements continues to grow. This can be seen with the number of increased lettings of small to medium sized offices - a noticeable change from the transactions witnessed pre-pandemic.
BT’s 283,073 sq. ft move to Three Snowhill in 2020 remains unrivalled in scale as businesses continue to adjust their office space to accommodate new ways of working.
According to data from the Birmingham Office Market Forum, office deals have remained steady in 2022, in which a total of 115 office lettings in central Birmingham amounts to a total take up of 692,700 sq. ft – an increase of 21% from the previous year.
The private sector once again led the way. The standout deal for 2022 is Goldman Sachs’ 110,000 sq. ft at One Centenary Way. Other notable deals include the Global Banking School taking 43,766 sq ft at Norfolk House, Mott MacDonald taking 30,811 sq. ft at 10 Livery Street and OPG taking 27,132 sq. ft at Victoria Square House.
As more employees return to the office, hybrid working patterns have been adopted across most sectors, which continues to impact the long-term rental market, as occupiers look for more flexible and collaborative space.
At the beginning of 2022, more than eight in ten workers said they planned to continue to hybrid work; while the proportion of people splitting their time across home and the office increased to 24%, those working exclusively from home fell to 14%.
However, the Birmingham office market remains buoyant. The Commonwealth Games has been pivotal in raising the city’s profile among an international audience. This is reflected in new organisations taking space in the city.
While it has become apparent that one size does not fit all, Birmingham, like most cities, has an increased demand for Grade A, flexible floorspace which satisfies emerging demands for workspaces. These include ‘sustainability,’ wanting ‘greater collaboration space,’ and ‘healthy offices’ that are ‘future pandemic proof’.
As the race for talent continues, occupiers are relying on developers to re-imagine buildings into innovative workspaces with net zero credentials, which are attractive to new employees. However, with flexibility comes the inevitable competition for space, which will naturally push rental rates up.
Investing in innovation
According to Deloitte’s latest CFO Survey, CFOs remain positive on investment in the medium term. An overwhelming majority (92%) expect higher investment in workforce skills and 79% expect greater investment in digital technology and assets over a three-year timeframe.
This is good news for the city as it advances its bid for new investment zones in the region to help drive innovation and provide new jobs, new homes and create new infrastructure.
While the proposed new zones will sit outside of the survey’s boundaries, it will help to attract new investment and business in core areas such as health and med-tech. The West Midlands is already emerging as a hub for health innovation and improved access to capital is vital for start-ups and SMEs.
The West Midlands Recovery Action Plan - alongside eight research intensive universities and innovation parks such as Birmingham Research Park, Birmingham Science Park and University Science Park – will help drive the regional economy and attract further investment into the city as well as talent.
Levelling up talent
Birmingham is one of the first ‘super diverse’ cities in the UK. It is home to people from 187 different nationalities and well-established as an educational hotspot that continues to attract students from across the UK and the world.
Recognised as a City of Sanctuary, it has one of the youngest populations in Europe, offering the opportunity to nurture and retain talent in the region.
The launch of Birmingham City Council’s ‘Everyone’s Battle, Everyone’s Business Equality Action Plan for 2022/23’, alongside the city’s accreditation as a ‘Living Wage’ city and early adopter of the RACE Code, further supports the region’s commitment to levelling up talent for local communities and students looking to stay in the city after graduation.
It is estimated by the Higher Education Statistical Agency that in 2021/22 there were over 93,500 students in the city, with international students representing c.19% of the total student population.
Despite the rise in student numbers, just 412 new student bed spaces were completed in 2022 from Compass in Eastside and Phase 1 of Volume Works’ three-phased Hanley Street development in the Gun Quarter. Phase 2 of Volume Works is the only new start in the purpose-built student accommodation sector in 2022 and will deliver an additional 107 units when it is completed in 2023.
Once all phases are fully completed, the £65m development will deliver 376 beds for the ever-growing student population.
Looking forward, the student accommodation pipeline continues to be weak within the survey’s boundaries and well below the 10-year average of 660 beds.
There are currently two potential new developments on the horizon within the survey’s research area. However, this may quickly change as Birmingham’s large student population continues to grow year-on-year.
Construction space within the survey’s boundaries for large educational buildings is scarce. It explains why most new activity in the education and research sector sits outside of the research area.
Universities are continuing to invest in their educational facilities, with one educational scheme completing in 2022 and one new start.
University College Birmingham’s new Engineering and Sustainable Construction Centre broke ground in 2022. It has been specifically designed to offer courses in sustainable construction methods, manufacturing technologies, renewable energy and cyber and digital skills to employers and their supply chains. Part of the regeneration of James Cond printworks in the Jewellery Quarter, the building is due to completed in 2024.
Is it the end for big retail developments?
According to Deloitte’s latest consumer tracker, consumer confidence improved slightly in Q4 following fifteen months of consecutive decline, where it had reached its lowest level on record in Q3 2022. However, as the gap between incomes and the cost of living widens, it seems this may be the final straw for some retailers as consumers continue to cut back and concentrate on essentials.
During Q4 2022, the proportion of consumers adopting coping strategies to manage the rise of the cost of living fell, but consumers maintained some of their recessionary behaviours, including cutting down on unnecessary expenses. Real incomes are set to decline for the second consecutive year and consumer spending is likely to shrink.
Although consumers are less pessimistic about their levels of debt and household disposable income, looking ahead into 2023, one in four consumers are planning to use more retail loyalty schemes to benefit from member-only discounting with a further one in four consumers also planning to put off new purchases altogether by repairing or fixing existing items.
Reduced energy consumption, less spend on clothes and shoes, and reduced spending on leisure activities take the top three spots on how consumers are cutting spending to offset the rise in energy and food costs.
Online retail fell by 1% in Q4 2022 compared with the previous quarter. The share of online sales as a proportion of total retail sales continued to drop reaching 25.4% in December from 28.8% for the same period a year ago. Online shopping fell more rapidly in December as online retailers were impacted by the postal strikes.
However, progressively falling online sales in 2022 point to a more fundamental trend in online retail. While the pandemic drove people online, the cost of living crisis has driven shoppers back to stores, not only to reduce the cost of deliveries, but also because many shoppers have switched to cheaper brands or stores that do not always have an online presence.
Whilst this shift continues to suggest spending has now settled at a new post-pandemic level, the impact on the High Street has already taken its toll.
While Joules and the Sofa Workshop are just a few household brands that have experienced difficulties, the sector continues to flex.
Unsurprisingly, there were no new retail-led schemes in 2022. However, 41,204 sq. ft of retail space has been delivered as part of mixed-use schemes – a trend which will continue for the foreseeable future with 117,713 sq. ft under construction and 262,841 sq. ft in the pipeline.
The current economic downturn may further hamper retail activity, but supermarkets and food retailers continue to put in strong performances.
2022 saw one new hotel scheme breaking ground, the refurbishment of the Central Methodist Hall in the City Core. In addition to the new scheme, three additional hotels are currently under construction.
Work is still underway at Doubletree Hilton in Snow Hill. When complete, the £25m refurbishment and extension of the former Old Angus Hotel in the City Core will add another 93 rooms and a roof-top terrace.
Similarly, The Royal Angus hotel on St Chad’s Queensway in the Gun Quarter is nearing completion and will add another 174 beds.
The future
Economic headwinds are likely to feature heavily in any developer’s risk profile for the coming year, but the emerging trends in 2022 are likely to continue into 2023 and beyond.
The planning pipeline in most sectors is strong, particularly in the residential market. A growing population, coupled with an insatiable demand for homes and investor confidence in BTR, will see more schemes cutting ground over the next 12 months alongside a rise in planning applications.
To meet the demand for housing, Birmingham’s skyline is also set to change again, especially across the spine of the city. Planning for schemes of 50-storeys or more will become more commonplace as the drive for good quality, city centre living continues.
However, as the trend to go upwards continues within the City Core, it will be matched by the demand to regenerate historical buildings with industrial character in other areas of the city. The move towards Birmingham becoming a carbon-zero economy by 2030 and the whole of the West Midlands by 2041, will see an uplift in office refurbishments and carbon-zero housing, as well as increased connectivity via green transport.
Looking at the pipeline, the trend to include retail as part of mixed-use schemes rather than pure retail developments will continue. No pure retail scheme is set to cut ground during 2023. However, the sector will continue to flex and adapt to consumer demand.
Birmingham is geographically well-placed to make the most of improved public transport and sustainable transport connectivity in the coming year. There will be a continued focus on improving the city’s inter connectivity with its suburbs and neighbours, which is evident in the ongoing investment into the metro system and HS2.
However, it’s not just about Birmingham. Expected growth in Wolverhampton, Coventry, Dudley and the wider region alongside the expansion of Birmingham’s City Core is reflected in the emerging Local Plan.
For the whole region to prosper, the construction activity in Birmingham needs to be reflected in the surrounding areas. The move towards a carbon-zero economy by 2041 will be an uplift in office refurbishments, carbon-zero housing as well as increased connectivity via green transport.
2022 was the year all eyes were on Birmingham. Now it’s the time for the city to be bold, bullish and deliver a legacy that will see the region prosper for many years to come.
Data in detail
A summary of all data across all development sectors can be accessed using the interactive Development map, Development activity and New start charts below, allowing you to explore all development projects, their location and what this means in terms of overall development activity.
Contacts
Eleanor Bird
Assistant Director, Real Assets Advisory
Juliet Halfhead
Midlands Practice Senior Partner
Jane Kistler
Associate, Real Assets Advisory
The Report
Why?
A report that measures the amount of development taking place across Birmingham City Centre and its impact. Property types include residential, office, hotel, retail and leisure, student accommodation, education and research facilities.
Where?
Birmingham City Centre encompassing those areas largely within the outer ring road, including: Eastside, Westside, Southside, Digbeth, Jewellery Quarter and Gun Quarter.
What?
Developers building new schemes or undertaking significant refurbishments exceeding the following sizes: office – 10,000 sq ft; retail and leisure 10,000 sq ft; residential property – 25 units; education and research – 10,000 sq ft; hotel – 35 rooms.
When?
Data for the Crane Survey recorded development activity between 3 January 2022 and 3 January 2023.
How?
Research for this report was undertaken by the regional Deloitte Real Assets team based in Birmingham which has monitored construction activity and planning permissions granted over a number of years, supplemented by rigorous field research. This research has been verified by industry contacts and an additional in-house research team.