Less is more, as the saying goes, and it's the approach that Kier Property has taken in its large-scale refurbishment of Birmingham's 19 Cornwall Street.
Eight years after buying the office, the UK property investor-developer is preparing to launch the Grade A workspace next month, having decided to remove lettable area from the building.
While that may seem surprising in a market where supply of prime accommodation is slim, Mark Robinson, senior development director at Kier Property, says generous lounge spaces and entrance level showering facilities are just as important to occupiers today as raw floorspace.
"Right at the very start of the project, we did debate about the [location of the] cycling, storage and 'back of house' facilities for changing. We have two levels of basement, so we have plenty of space, but we made a conscious decision probably about three to six months before starting on site to switch the layout and to put the cycle entrance and storage and changing facilities all on the ground floor.
"That was quite a tough decision because it meant forgoing lettable floorspace, so we gave up [net internal area], but our logic was that we felt it made the building more lettable, it would improve the appeal to occupiers, and certainly the feedback we've had anecdotally from companies has been that they really like that.
"That's quite a tough commercial choice because on paper you wouldn't do it, but when you feel the market, it does make complete logical sense. In new buildings we definitely look at doing that, rather than putting it in the basement, which would be the last resort from our point of view."
Leigh Thomas, group managing director at Kier Property, says the developer also took away lettable space to provide a grander entrance at 19 Cornwall Street, where local artwork will be hung in the next couple of weeks to show off the double-height entrance.
Other amenities at the property fitted out by Willmott Dixon Interiors include a communal roof terrace, a 1,750-square-foot studio space and 150 car parking spaces, of which around 20% have EV charging capability.
Thomas says the amenity and the feel of offices bear much more weight with tenants than they ever have, with multiple teams from companies, including HR and finance alongside property, now taking a look at buildings before signing off on moves.
He adds: "The emotive part of an occupier's decision-making process in terms of: does the look and feel of the building match our corporate culture, can we attract people in, has it got the right amenity – all of these things are much more important now than the cost of paying £45 or £50 per square foot, or whatever it might be. Really understanding what drives occupier demand is what we have tried to do with this building."
Sustainability, alongside amenity, was another key consideration of the team's vision for 19 Cornwall Street, which sits in the city's central business district, down the hill from Colmore Row and a three-minute walk from Birmingham Snow Hill rail station.
Kier says it is the only refurbished office in Birmingham to have been independently reviewed to five-star NABERS standard, which just one new-build scheme in the city has achieved.
The developer argues features such as new LED lighting, 4,000 square feet of PV panels, high-performance insulation and smart energy management systems will means tenants have significantly lower running costs compared with traditional office spaces, as well as a lower overall service charge. The office will also be Net Zero Carbon in operation and will be BREEAM 'Excellent and EPC 'A' rated, while targeting WELL Gold.
"We have invested in the right [mechanical and electrical] systems, in the right sustainability measures within the building ultimately to try and create a space which not only appeals to occupiers from the point of view of attracting and retaining the best people, but also from an occupational cost point of view," Robinson says.
"When you think about the rents, the rates, the service charge, the utilities, this building will be highly competitive because we've put the money in to make it sustainable, not only in terms of the content of it, so thinking about recycled floor tiles and recycled content in furniture, but also things like the solar panels which are giving free energy back to the building which has a direct impact for occupiers.
"So whether you look at it from a numbers point of view, or a social point of view about attracting and retaining the best people, we feel that this building is offering exactly what the market needs. There are very few [buildings] in the regions, let alone Birmingham, that can really do that, so it's not only a choice for people looking at Birmingham, but those looking at the regional market as well," he adds.
Thomas says: "The solar panels on the roof should provide 50% of the electricity for all the common areas, so again that is a huge saving on your service charge. Also, if you look at NABERS five-star, there is probably only one other building in Birmingham at that level and even in the whole of London, you are in low 20s.
"So for those corporate occupiers who are trying to drive their reduced carbon and their sustainability credentials, this building really satisfies that need on the corporate ESG agenda, and there is virtually no other building in Birmingham that can do that."
Having originally tipped 19 Cornwall Street as a headquarters office for a single tenant, which it still can be, the changing nature of the office market in the post-Covid years means Kier is now looking at letting the property to multiple tenants.
The market is, however, looking more positive than a few years ago, with take-up in Birmingham reaching 843,218 square feet across 96 transactions last year, according to the Birmingham Office Market Forum, increasing from 702,993 square feet the year before. It means demand is improving at the right time for the developer.
19 Cornwall Street comprises 134,443 square feet over seven floors, with floorplates of around 20,000 square feet, but can stretch to 139,000 square feet for a single occupier. The Kier bosses say rents will be priced competitively, with the owner in advanced talks over one of the whole floors and one of the ground floor spaces.
Robinson says letting the building on a multilet basis is advantageous from an investor point of view because it gives the asset a flexibility and longevity. "If it is a multi-tenanted building, then you've got that variety and that rental growth as well as the management of risk," he says.
Thomas adds: "We are very agnostic but, as Mark says, the building probably lends itself to two, three or four lettings, but you could probably break it down much more. I'd be disappointed if we have to subdivide floors and start carving up the building to attract tenants. But that's not our sense at the minute, the amount of people we've had round looking round at one, two, three floors is probably quite encouraging."
The duo argues that the large investment in the refurbishment of 19 Cornwall Street will see the property "stand toe-to-toe with the best of the new accommodation" in terms of its performance".
Robinson says: "I think it comes down to occupier choice – do they want a brand new building that might be on plan, or just finished, or do they want something which is refurbished. We find a lot of occupiers are looking at both options and the pricing is essentially a product of the market.
"We are not concerned about the pricing reflecting anything else. There has been rental growth in the city, there's a real lack of supply and a real high level of demand from occupiers who want best-in-class space."
Thomas says: "Pre-Covid and through the Covid years, a lot of property companies didn't start spec office developments, so the supply of this type of quality of building is fairly limited. Super Grade A in Birmingham is probably at 2.5% vacancy and tenant demand for this quality of product is holding up really well. We expect there to be continued rental growth in Birmingham which will be encouraging and hopefully that will give investor sentiment a bit of a boost.
Having completed its refurbishment and appointed CBRE and Cushman & Wakefield as joint letting agents, Kier will official launch the property later this month. Robinson says the team's decision to take on another refurbishment will be dictated by the property in question.
"We are finding that some buildings lend themselves to refurbishment a lot more easily then others," he says, "and you do need to spend the time and the effort. If it gets past the location test and the size test, then it's about looking at how easy it is to convert, you've got to look at it on a building-by-building basis and your starting point is crucial."
Thomas concludes: "Refurbishments aren't always the easiest thing to do, so you've got to be very careful of the buildings that you do choose to do that product in both size, location, shape, but also intrinsic risk in the building.
"I have that conversation with pension funds an awful lot, who say that we can buy something and get the thing knocked up in a couple of years, and the reality is that sometimes a new build is cheaper than doing a refurbishment."
