Options limited for secondary space, says agent

POOR quality secondary office floorspace accounts for around 70% of total UK stock, according to new figures from DTZ.

The firm said that Grade A (prime) and Grade B (quality secondary space) account for 31% of total UK stock.

In Manchester, some 20% of the available space is Grade A – higher than the national average of 9% – but this is running out quickly.

Rob Yates, director of office agency at DTZ in Manchester, said: “Grade A supply has reduced sharply, absorbing the record development pipeline delivered between 2007 and 2010.”

He said that availability currently stands at around 677,000 sq ft, and with 400,000 sq ft of grade A being let in any given year there is only around 1.76 years of standing supply, with very little currently in the development pipeline.

As a result, he argues that well-located secondary space let reasonably easy, and that a number of older, obsolete buildings are now being earmarked for redevelopment – such as Elisabeth House, Brazennose House and London Scottish House (right).

“It is unlikely, however, that any newly completed stock will be available until 2013 at the earliest,” he added.

DTZ has said that it expects availability of Grade C space to grow in the UK regions as leases expire and occupiers trade up to better quality space. Although landlords have the option to redevelop the space to upgrade it or provide alternative uses, DTZ said that this is more difficult in regional markets.

DTZ UK head of research Martin Davis said: “Beyond London the prospects for alternative uses are less easy to implement, certainly for residential development while the market is weak.

“This creates a problem for grade C owners in terms of recycling unwanted stock – especially since grade C availability is likely to be higher in less developed markets.”