Liverpool office market sees steep decline after Q1 ‘put sticking plaster’ over sector

Liverpool has seen a steep decline in office sector transactions during the second quarter.

Figures from the Liverpool Office Agents Forum (LOAF), made up of property agents across the city, highlight 23,879 sq ft of transactions were completed in Q2 which was a reduction from a buoyant 95,905 sq ft of space in Q1 this year.

There is around 900,000 sq ft of office space currently vacant in the city centre, but only about 12% is Grade A accommodation, and only 7.75% is located in the business district.

Gabriel Davies, Associate at Fisher German – which has an office in Tithebarn Street – and Chair of LOAF, said this has been a very challenging quarter for the office market in Liverpool.

He said: “I think the successful figures for Q1 this year and Q4 in 2023 put a plaster over the issues we are now facing.

“There has been some reasonable success with the gaming industry taking up office space, and continued churn in the professional services sector, but we are stuck between a rock and a hard place.”

He added: “The lack of brand new Grade A offices is having a negative impact on the market, however, it isn’t as simple as ‘build it and they will come’.

“Without having an underlying headline rent that allows for speculative office development, the city has seen a stagnation of new office space in the commercial district, apart from several refurbishment schemes.

“A low headline rent in comparison to other regional cities means developers are looking elsewhere, coupled with the fact that best in class offices drive a rental premium means we are caught in a cycle of low headline rent and a lack of new build development.”

He said: “There must be a reset in the market, otherwise the cycle will continue.

“Public and private sector partnership could result in the development of new offices. Without the luxury of an appropriate headline rent to promote development, a public and private sector partnership could be the catalyst for further development and to break the cycle.

“A similar approach could be taken to recent developments in the Wirral, where the public sector has assisted with the development of office space in conjunction with the private sector, be that assisting with funding or acting as a pre-let. That has led to improving the quality of the office stock, attracting new occupiers and driving up headline rents.”

But Gabe remains optimistic for the remainder of 2024 and anticipates an upturn in activity in the city centre, despite his current concerns.

“Several sectors have emerged over the past 12 months, notably the gaming and creative sectors which has been crucial,” he said.

“The Liverpool City Region Combined Authority Corporate Plan aims to continue diversifying its economy through strategic investments in health and life sciences, digital and creative industries, and advanced manufacturing which is really important.

“Central to the Corporate Plan is a vision of inclusivity, ensuring that all 1.6 million residents of the region benefit from economic growth.

“The plan emphasises the need to tackle long standing inequalities and remove barriers to opportunity, with specific initiatives aimed at enhancing access to education, employment, and skills development, and this can only help the present issues surrounding the ageing office stock and attracting new businesses or retaining expanding companies that are looking for modern, large, adaptable spaces.”

LOAF is made up of Fisher German, CBRE, Avison Young, Worthington Owen, Mason Owen, Keppie Massie, Mason Partners, Eddisons, Hitchcock Wright & Partners, LM6, SK Real Estate, and B1 Real Estate.