Land and capital values on the rise in Birmingham city centre

A shortage of deliverable development sites in Birmingham city centre is causing a surge in land values, according to research by CBRE.

Forecasts by the property consultancy suggest that by 2018 developers could be paying up to £10 million per acre for prime development sites. Values have increased by more than £5 million per acre in the past five years alone. In contrast, in 2013 developers were typically paying just £2 million per acre.

CBRE’s Birmingham City Centre MarketView Q2 2017 reveals that areas on the fringe of the city centre, in particular Digbeth and the Gun Quarter, are experiencing some of the highest price growth as opportunities across the city become more limited.

According to the CBRE report, prime residential capital values in Birmingham city centre are also expected to reach pre-recession highs this year, rising from more than £350 per sq ft to £400 per sq ft.

Adrian Willet, senior director, residential and capital markets team
With the exception of a couple of niche high-spec projects, we are yet to see a scheme where every unit has sold for £400 per sq ft but this looks like it’s going to become the benchmark for the very best postcodes in the city by the end of this year.
Adrian Willet, senior director, residential and capital markets team

In the for sale market, there are currently around 3,500 residential units under construction and at least 6,500 in the pipeline, based on identified sites, in the city centre. When combined, the total sales could total £1.6 billion.

Build-to-rent (BTR) or private rented sector (PRS), as it’s also known, is seeing increased development in Birmingham, albeit the city still lags behind other regional centres. Around 1,500 build to rent units are under construction across five schemes in Birmingham, representing a total investment value of £250 million, with a further 3,550 units across eight schemes in the pipeline. If delivered, they would represent £800 million of investment in the city centre.

Mr Willet said: “In terms of BTR development, Birmingham has been behind the curve compared to other major cities, such as Manchester, and as a result is now having to play catch up.

“However, there is a healthy pipeline of schemes coming forward and if all the units currently under construction, both for sale and BTR, are delivered, it will bring the city justifiably back in line with Manchester.”

According to Mr Willet, demand is being driven by London-based and international investment partners who are actively seeking development opportunities in Birmingham and the wider Midlands region.

Birmingham’s renaissance, both economic and cultural, is also attracting new businesses that want to be based in the city,

“There has been a lot of commercial development in Birmingham and some significant business relocations from London, such as HSBC,” said Mr Willet.

“This has led to an increase in employment opportunities and the leisure offering in the city has also become much more diverse, cultured and interesting. Birmingham is cool again.

“London will always dominate, but I think that Birmingham makes a compelling alternative for both young professionals who might want to live here and investors.”