Occupier demand continues sharp bounce back
THE sharp bounce back in occupier demand for office space in the UK’s major regional cities has continued apace across the second quarter of 2014.
This is according to the latest regional office market report from GVA.
Leeds, one of the cities analysed in GVA’s Big Nine, saw city centre office take-up in the second quarter of 2014 remain broadly in-line with the quarterly average at 117,614 sq ft.
However, speculative development in the city is gaining traction. Roydhouse Properties has started construction on the 220,000 sq ft office-led Central Square project on the former Lumiere site and work has begun on MEPC’s 104,000 sq ft 6 Wellington Place. Meanwhile, Bruntwood and Kier have announced that they will commence work at 3 Sovereign Square.
Across GVA’s Big Nine, Manchester was the city that experienced the biggest spike with almost half a million square feet of new city-centre lettings secured between April and June. Despite out of own office market take-up across the nine key cities beating the quarterly average at a total of 819,415 sq ft, take-up in Leeds was down by almost a third at 55,244 sq ft.
More widely, the recovery in investor confidence that started to show through in Q4 of 2013 resulted in the subsequent abrupt yield compression in the market in early 2014.
GVA’s Big Nine research underlines the growing strength of occupier demand that underpins this renewed confidence: Manchester city centre take-up for Q2 amounted to 484,000 sq ft, almost double the quarterly average, while total take-up in Q2 across the nine cities surveyed was 15% above the five-year quarterly average, at 2.85m sq ft. Out-of-town take-up was 19% above the quarterly average at 819,500 sq ft.
Carl Potter, national head of offices at GVA, stressed the differences between the occupier recovery taking place now and the story during the capital boom that led up to the 2008 crash.
He said: “Sector-specific growth in the UK’s economy has begun to feed into the need for companies to grow their office space. This is very different to the experience of the mid-2000s, when the vast majority of new-build, capital growth and investment decisions were being made based on the continued belief that values would increase – irrespective of occupier demand.
“The significant increase in public-sector employment around the UK cities was arguably detrimental to the overall real growth in these cities and, while the public sector continues to be scaled back, it is clear the wider economy is on a roll. This is perhaps most significant in the regional out-of-town markets. Occupiers came out of this market significantly after the ‘tech crash’ of March 2000, and until now there hasn’t been a good occupational story in any of the regional out-of-town markets. Now, however, there are significant levels of demand and we expect our H1 Business Parks Research to underline the continuing decline in availability. The level of demand here is cross-sectorial with many of the UK’s exporters, engineers and industrialists based more out than in the city centres – with airports being a key attractor.”
