Birmingham: the next-gen's built environment

Nurturing the next generation: Education, AI and infrastructure

Birmingham's education sector needs to adapt to prepare the next generation for an AI-driven future, with significant implications for the city's educational and supporting infrastructure. Nationally, there has been a notable surge in students pursuing AI and tech-related courses, which could be driven by the popularity of large language models introduced in recent years. Birmingham's universities reflect this trend, with students studying computing related topics, including AI, increasing by 62% between 2020/21 and 2023/24. This growth speaks to the changing shape of the university sector, and the increasing demand for skills in emerging technological fields.

However, by the end of 2025 there was no education and research floorspace under construction, with the one new start, a change of use, also completing. Amongst the trends shaping this sector nationally, 45% of higher education providers forecast a financial deficit in 2024-2025, an increase from 30% the previous year. Financial constraints relating to operational costs and funding shortfalls could drive universities to seek to maximise utilisation of floorspace per student. At the same time, the rapid pace of technological advancement may be outmatching university plans, potentially creating a gap between the need for skilled talent and the physical infrastructure to support their training. While the pause in new construction of educational floorspace could also reflect a shift away from traditional teaching space towards hybrid learning patterns, modern higher education, particularly in AI and data-intensive fields, requires robust infrastructure. Birmingham's educational facilities will increasingly need advanced power and data connections to support cutting-edge courses and research, ensuring the city remains competitive in attracting and retaining talent.

The Birmingham Knowledge Quarter (B-KQ) officially launched in May 2025. Through strategic partnerships, place branding and infrastructure investment, it could create the conditions needed for the education sector to both grow and adapt in the city in 2026.

The growing student population, and their tech-focused education, directly influence the demand for purpose-built student accommodation (PBSA) and the evolving requirements of the modern office environment they will eventually inhabit. In 2025, 1,664 student accommodation bedspaces were under construction, with one new start - St Chad’s Court. New PBSA developments are designed to meet the expectations of the next-gen student, offering essential amenities such as fast, reliable internet and collaborative learning spaces. Although the number of units under construction this year was less than the record-breaking figures we saw in 2024, the overall pipeline for PBSA remains robust with nearly 8,000 units on sites with planning permission and/or cleared sites. This indicates optimism in the market. However, there are ongoing challenges which could fetter delivery in 2026, including navigating the Building Safety Act (many of the schemes in the pipeline meet the Higher Risk Buildings (HRB) definition), competition with the BTR and co-living market, as well as ongoing viability challenges, including through programme delays, higher specifications, debt and construction costs.

Graduates emerging from Birmingham's tech-focused universities will have high expectations for their future workplaces, seeking office environments enabled by smart technology, robust data infrastructure, and seamless connectivity to support AI-driven work and collaborative practices. Birmingham is positioning itself to incubate new businesses in emerging tech sectors. Investments like Atos's £10m Sovereign Orchestration Hub, the School of Coding & AI's new £2.5 million state-of-the-art facilities and Goldman Sachs' FinTech team expansion, underscores the city's appeal for tech talent and the need for a skilled workforce. Deals in this sector and the construction of offices to serve it, provides market assurance for Birmingham’s next-gen workforce and should support talent retention.

The office evolution

The office market in Birmingham continues to evolve, with a clear emphasis on quality and viability, increasingly reflecting a multi-tier market driven by diverse occupier needs and financial considerations. Our data indicates that the 'renew not new' trend remains strong: 46% of the 477,223 sq. ft. of office space completed in 2025 and 73% of the 733,912 sq. ft. currently under construction are refurbishments. 

Challenges persist in making new-build office space commercially viable, with current rents and yields often deemed insufficient to attract investor interest in high-value schemes. To enhance viability, cost reduction strategies could include 'de-badging' from certain accreditation systems, reducing in-house amenity space by leveraging external local facilities and reconsidering speculative Cat-A fit-outs that often require costly changes to suit occupiers. These discussions are driving the concept of a 'minimum viable office building' – one that delivers essential quality without unnecessary cost complexities. This approach often caters to occupiers who prioritise high-quality refurbished space at a lower price point, accepting fewer 'bells and whistles' compared to premium new builds.

While refurbishment is a dominant trend, new builds can deliver space that meets occupier needs as well as contributes to place-making and the vitality of the city centre. The market is responding to meet occupier demands in their ‘flight to quality’, particularly from large corporate occupiers where highly sustainable, amenity-rich buildings are vital. These firms seek ESG-compliant and technologically advanced environments that meet the demands of a modern workforce, including prioritising Grade A, modern spaces that offer superior connectivity and power infrastructure. CBRE reports that the top three ‘reasons for relocating’ are cited as buildings that suit sustainability goals, better lease terms (lower rent and flexibility) and a location that suits employees. Major firms are choosing to relocate to premium, modern spaces in vibrant parts of the city centre. This includes the announcement that Deloitte will relocate its 1000+ strong midlands team to One Centenary Square at the Paradise development, one of the city’s largest and most sustainable building, in 2026.  Other notable transactions include CBRE and EY’s respective relocations to Three Chamberlain Square, also at Paradise.

This demand for prime space is translating into robust rental growth in a sector of the market with low supply, influenced in part by factors such as increased cost of capital and inflation of construction costs which constrain new delivery.  Avison Young reported that the availability of Grade A space in Birmingham is critically low at 1.9%. The resulting competition for space is driving prime rent increases, as the WMCA reported a significant jump in rents between Q2-Q3 2025, with prime rents hitting £45.50 per sq. ft. in Birmingham, a quarterly increase of 5.2%.

The substantial planning pipeline of 5.7 million sq. ft. of office space in unimplemented permissions indicates significant potential for space to come forward. However, Birmingham faces shortages of prime sustainable stock, which will continue to drive increased demand for prime refurbished buildings into 2026, further solidifying the distinct segments within the city's evolving office market.

Future outlook: Securing the next generation's built environment

Birmingham's built environment is at an important juncture, shaped by the intertwined forces of technological innovation and sustainability. The city's commitment to nurturing a tech-savvy "next generation" through its universities is creating a dynamic talent pool, which in turn demands modern, connected and sustainable living and working spaces. While the education sector faces the challenge of adapting its physical footprint to meet the demands of AI-driven curriculum and robust infrastructure, the student residential market continues to grow, providing high-quality, amenity-rich environments for this cohort.

Amongst viability issues constraining the office floorspace pipeline, refurbishment of existing stock has proven to be an effective, sustainable solution for providing floorspace where new Grade A space has proven unviable. A significant quantum of office floorspace has been approved for development in the city, which factors including committed occupier interest to pre-let could help bring forward. The next major new-build office in the city will likely be occupier-led, with corporate investment providing certainty for build requirements, occupation and rental returns. Could this be a strategic relocation of a major occupier from London, or a non-domestic brand seeking its first UK base? Recent FDI success could help secure the latter. In either instance, this would bode well for recent graduates of the city’s higher education institutions looking to start their career here and establishing Birmingham further as a hub for talent and a base for business. 

To truly secure the next-gen’s built environment in Birmingham and ensure it remains a leading hub for innovation, it is imperative that the real estate and construction sectors are able to keep pace with demand for the advanced spaces that the next generation of talent and businesses need to grow and thrive. With forward and bold ambition, the city will continue to grow and thrive.