Birmingham is already undergoing substantial transformation following high levels of investment from both the public and private sector. The £600 million redevelopment of New Street Station, which includes the Grand Central shopping centre, has provided the city with an impressive transport hub and seen significant visitor footfall since opening in September.

Investment in public infrastructure is generating impetus for private sector investment. The first phase of the £500 million Paradise development, which expands the city’s central business district, is already underway. Outside the city, the £200 million Resorts World recently opened at the NEC.

The profile of investors in the city has expanded from UK funds to overseas investors. Over the last two years we have seen interest in commercial property from Germany, the US, Middle Eastern sovereign wealth and the Far East as investors diversify away from London.

Further growth

As the economy strengthens, there is potential for further growth. The West Midlands was worse hit by the last recession than many other regions. Having grown more slowly than the UK average over the last decade, it has lagged behind its potential. While Birmingham and Solihull contributed around 2% of GVA last year, the region as a whole delivered 7.3% of national growth. The devolution deal together with the galvanizing impact of HS2 will help the region increase the £80 billion it currently contributes to the UK economy.

^{Source: Oxford Economics}

The scope for growth is strong. Capital Economics expects the West Midlands to be one of the stronger performing regions over the next couple of years, supported by a robust domestic car market and strong exports. This growing confidence is reflected in plans by Jaguar Land Rover to spend over £3 billion on new product creation and capital expenditure.

We expect Birmingham’s relatively low employment and housing costs compared with London, will support further expansion. Our analysis shows that the differential between office rents in Birmingham and the City of London has grown by 48% over the last three years. We therefore estimate that moving a single position from central London to the West Midlands could save on average £8,000 pa in office property costs and £10,000 pa in staff costs.

^{Source: Savills Research}

Corporate expansion

There is a rising trend in corporate groups in the UK to either move away or expand from central London to major regional cities such as Birmingham and Manchester bringing substantial inward investment.

Cost pressures, regulation and compliance are all factors that have contributed to this over the past few years as has the search for more affordable secondary locations in which to place ‘back office’ operations. More recently, there have been moves to bring higher value jobs and management roles to the regions.

One example is Deutsche Bank’s shifting of front office investment banking jobs to its Birmingham office, employing traders at a fraction of the cost of basing them in London.

In one of the largest inward investment deals in the city for over a decade, Deutsche Bank acquired all 134,000 sq ft of office space in Five Brindleyplace, in addition to its existing offices at One Brindleyplace.

This year, HSBC agreed an even bigger deal to forward purchase 210,000 sq ft at 2 Arena Central in a move that allows it to bring its UK personal and business banking operations to Birmingham. The city is already home to more than 2,500 HSBC employees, and around 1,000 head office roles will move from London to Birmingham before the end of 2018.

As well as established companies, there is also growing demand from start-ups. Over 18,000 new businesses were registered in Birmingham in 2014, the second highest concentration in the UK.

Oxford Economics forecasts the number of workers in Birmingham to increase by 4.9% by 2030, with the professional, scientific and technology sectors growing fastest.

This growing occupational demand supports investor demand. Linking Birmingham’s growing financial district and tech sector, including the flourishing creative enterprises in Digbeth, with London via HS2 adds to the attraction for both occupiers and investors enabling further growth.

^{Source: Savills Research, ONS}