UK homebuilder Galliard and a private investor-JV partner have put a ‘for sale’ sign up for an office in Birmingham which has piqued the interest of international investors looking towards the regions.
Galliard Homes and its JV partner (thought to be Apsley House Capital) have appointed agents Knight Frank and Tydus Real Estate to market B1 in Summer Hill Road for around £25 mln (€30 mln), reflecting a net initial yield of 5.75% and a capital value of £276 per square foot.
B1 is a 92,472 ft2 (8,600 m2) office that has been extensively refurbished. Unit 1 is fully let to Birmingham & Solihull Mental Health NHS Trust for a term of 25 years with an expiry date in November 2030. The rent is reviewed to uncapped RPI in November 2025.
Units 2, 3 and 4 are let to the Secretary of State for Housing, Communities and Local Government.
International capital advisors say they are aware of the asset and that it is attracting interest from overseas players such as Middle Eastern firms looking at UK regional property given the relatively high pricing in central London.
Birmingham is the UK’s second largest city in terms of population and is also the largest contributor to national GDP outside of London. Approximately 40% of the population is under the age of 25 - the youngest cohort of any major European city.
During the pandemic outbreak of 2020, the Birmingham office market saw a 25% decline in office take-up to 520,000 ft2. Nevertheless, there is around 742,000 ft2 of live requirements seeking grade A office accommodation in Birmingham, according to agents, and B1 was able to attract government tenants in 2020 and 2021.
If B1 trades for around £25 mln, it will be a significant office investment for Birmingham, despite not approaching the size of some recent investments. In October 2020, Germany’s Union Investment Real Estate bought 55 Colmore Row for around £100 mln at circa 4.5%. In August 2020, Oval Real Estate acquired 1 Colmore Square for £86.75 mln (6.2%), and in 2019, Royal London Asset Management bought 45 Church Street for £61 mln (5.32%), while Credit Suisse Asset Management acquired 120 Edmund Street in the same year for £48.75 mln (6.10%).
There are currently several office buildings under offer in the city.
While B1 is currently an office asset, it has the potential to be converted into residential use. It is located on the edge of an area known as the Jewellery Quarter. A feasibility study for B1 has concluded it could accommodate a residential project of 750 units.