Rise in office rental costs expected to continue
Top office rentals in Leeds achieved £30 per sq ft (£323 per sq m) this year according to data released by Savills, with expectations this will grow to £32 per sq ft (£344 per sq m) by 2019.
At the same time, the rental differential between refurbished and new office space has increased from £0.50 per sq ft (£5 per sq m) to £3 per sq ft (£32 per sq m) as recently completed Grade A space has attracted strong demand.
The Leeds office market has remained popular in 2017 with take up levels reaching 784,000 sq ft (72,836 sq m) in the first three quarters of the year, according to the research by estate agents Savills.
Take up is 60% above the five year average for this time of the year, led by key deals including HMRC and NHS taking 378,000 sq ft (35,117 sq m) at Wellington Place, Burberry relocating to 6 Queen St and the serviced office sector expanding their presence in the city.
Savills, however, has found that average lease lengths across regional cities as a whole have fallen by 3% as serviced office providers increase their presence in the market.
Occupier activity in the out of town market has picked up with a cluster of sub-3,000 sq ft (278 sq m) deals in York during the third quarter. Take up in the out of town markets reached 258,000 sq ft (23,969 sq m) for the year to September; 18% above the five year average – with Savills predicting these levels to reach 350,000 sq ft (32,516 sq m) by the end of the year.
Paul Fairhurst, head of Savills Leeds, said: “The Leeds office market continues to be popular with a range of occupiers causing a tight supply schedule and increasing competition for Grade A space. The creation of a government hub, rise of serviced office occupiers and the recovery of the out of town market has significantly boosted the take up totals so far this year, something we expect to continue into 2018.”
