Significant pre-let activity needed in city say experts
HIGH-profile occupiers are on the look-out for space in Leeds as industry experts warn significant pre-let activity is needed this year in order for the city to compete.
Paul Fairhurst, director of Ofﬁce Agency at Savills in Leeds, said the pace of change in the Leeds ofﬁce market has continued into 2014 following the record uptake of last year (794,000 sq ft) with the big three, The Mint, No.1 Leeds and Broad Gate, all fully let and stock at a record low level.
“This year will need some signiﬁcant pre-let activity in order to compete. Schemes capable of early delivery are well placed to take advantage of pre-let opportunities and predicted rental growth,” Fairhurst said.
“We believe that developers will start to seek funding on the back of signiﬁcant pre-lets. With KPMG and Shulmans solicitors already committing to take pre-lets over the past two years. Key schemes in the pipeline include Town Centre Securities’ Whitehall Riverside, MEPC’s Wellington Place, Central Square, Sovereign Square and City Square House likely candidates for the next round of pre-lets,” Savills added.
In the Savills Leeds Office Market Report for June, the property firm said it believes high-proﬁle occupiers including Sky, Addleshaw Goddard, Squire Sanders and PWC will be looking for space in the next few years. PWC are front runners to complete the next pre-let of around 50,000 sq ft, Fairhurst added.
“Larger occupiers, such as Sky, NHS and PWC will still be active in the market as we go through 2014, however, following London’s lead, mid-size tenants will become much more active off the back of improving business conﬁdence and a tightening supply pool in this size bracket,” Savills said. A number of these companies are already reviewing future relocation plans, Savills says and while not all will move, less austerity driven decisions should generate demand for more Grade A modern product.
With a sharp change in the supply/demand dynamic in 2014, Savills predicts there will be more cranes on the horizon by the end of the year, with a potential 300,000 sq ft likely to start on site in the next 12 to 18 months. There is now an expectation that at least one of these schemes will start on site within the next six to 12 months, with Central Square the likely candidate.
The firm also predicts that Q2 this year will hit similar, encouraging levels as Q1 which saw with city centre uptake of 140,778 sq ft – the key deal being the University of Law taking 26,000 sq ft at 15-16 Park Row. Q2 has already seen service provider Saneff (which is managing the introduction of the payment systems for the Dartford tunnel) taking 24,000 sq ft at the St John’s Centre and Ashcourt Rowan Wealth Management taking 11,146 sq ft at City Point.
The research highlighted that there is a growing appreciation of the predicted shortage in Grade A accommodation – a direct result of lack of new development and continued strong take up. There is now only 270,000 sq ft of Grade A space available in the city centre, with the largest amount of space at No.1 Whitehall Riverside (34,000 sq ft) and Bridgewater Place (28,000 sq ft). The continuing erosion of Grade A stock across the city is now likely to trigger enquiries from a number of occupiers, with the fear of missing out on key opportunities a likely catalyst to move, the research said. With less than a years’ worth of Grade A supply, the case for speculative development is strong with a paucity of existing stock and the signiﬁcant number of lease events due over the next few years which will further fuel demand.
Savills said it also envisages seeing a continued steady rise in refurbishment activity in the Leeds market as we go through 2014, typiﬁed buy options such as St Paul’s House on Park Square, 21 Queen Street and Evans of Leeds’ Capitol House and Bond Court. Although this may be a quick way to deliver Grade A supply into greater market demand, as well as a way of bringing down the secondhand space in the market, with limited ﬂoorplates, refurbishments do not necessarily cater for the larger requirements circulating the market, Savills highlighted.