Birmingham’s office market is entering a pivotal phase. Occupier demand is accelerating, and high-quality supply remains scarce in the most sought-after locations. After a slow first half of the year, total take-up reached 361,448 sq ft across 71 transactions by the end of Q3 2025. The rise in activity through the last quarter supports expectations that activity will continue to strengthen into Q4, with full-year take-up anticipated to align closely with the five-year average.
Vacancy has been steadily declining for more than a decade, reaching around 8% at the end of Q3. Although new completions are continuing to feed into supply, much of this space is already pre-let or under offer. A prime example is Federated Hermes, Three Chamberlain Square (188,000 sq ft), completed in May and now fully let or under offer.
No new development starts were recorded in Q3, emphasising the acute shortage of new-build Grade A space in the city centre. This ongoing supply constraint is expected to keep rental values on an upward trajectory and intensify competition for premium accommodation. With limited new-build activity, refurbishment-led schemes remain essential in delivering the sustainable, design-led workplaces occupiers now expect. Three major refurbishment projects are due to complete at the end of 2025, with further schemes scheduled for early 2026. While these projects will ease pressure in the short to medium term, the overall pipeline remains constrained, reinforcing the need for more core development to meet future demand.
Professional services have been the standout driver of demand so far this year, accounting for more than half of all Birmingham transactions. Meanwhile, sectors such as TMT and Education have been quieter, though there is clear latent potential should confidence return. Nationally, the ‘flight to quality’ trend continues to favour Grade A, sustainable, amenity-rich office space over legacy stock. In Birmingham, prime Grade A rents reached £46.50 per sq ft in Q3 at Three Chamberlain Square, setting a new city benchmark. With supply tightening and occupier appetite for premium space remaining robust, rents are likely to surpass this level by year-end. Headline rental growth for 2025 is expected to reach around 9%, with the possibility of new record levels emerging sooner than expected.
Investor sentiment remains cautious but increasingly engaged. While transactional evidence is limited, interest from opportunistic funds is growing and confidence is gradually rebuilding. As pricing adjusts and debt margins reduce, we should start to see this feed through to yield compression. Prime Birmingham office yields stand at circa 6.75%, offering compelling value relative to the South East.
Birmingham’s office market is clearly evolving. With occupiers becoming more aware of the scarcity of top-tier office space – and inward investment into the city continuing to gain momentum – the market is well positioned for another year of strong performance, rising rental values and sustained demand for high-quality accommodation.
Watch Charles Toogood discuss the latest trends in Birmingham’s office market here.
