Bargain Hunters Stalk This Birmingham Office Block For £35M, Less Than Its Rebuild Cost

One of Birmingham’s most visible office buildings is to be sold for less than its replacement cost, as investment funds aimed at private investors dash for cash.

The sale of Colmore Gate offers bargain hunters an opportunity to add value to a building with low rents and 60% vacancy.

The 171K SF block has been a rocky investment: In 2017 it was estimated to account for 5% of the value of the £1B fund, suggesting a value of around £51M.

But the building at 2 Colmore Row, owned by Aviva Investors UK Funds Property Trust, is now on the market via JLL for £35M. “A purchase at this level reflects an exceptionally low capital value of £203.68/SF, below replacement cost,” JLL’s marketing material said.

“[It has an] extremely low current average rent of only £24.37/SF, with prime rents now over 50% higher at £37.00/SF.” 

The 15-storey building is 60% vacant with vacant possession on the majority of the space by 2022. Total current passing rent is £1.8M with tenants including the Crown Prosecution Service, AON, Tesco, Paddy Power and Monty’s Deli Sandwich Bars. The average weighted unexpired term is 3.4 years to expiry and 1.6 years to break.

Aviva Investors declined Bisnow's invitation to comment.

In December 2020 Aviva Investors sought to expand its Birmingham office portfolio, making a bid to buy Nuveen’s 55 Colmore Row. Germany’s Union Investments beat other bidders to take the 157K SF trophy office building in October 2020 in a deal valued at more than £105M, a yield of 4.5%.

Aviva said it had invested “heavily” in its 84K SF block at One Temple Row. It now boasts the largest roof terrace in the city.