Take-up improves in Liverpool office market

TAKE-up of office space in Liverpool’s city centre market increased by 29% last year to 268,298 sq ft, bolstered by the letting of 90,000 sq ft to Weightmans at Bruntwood’s Plaza building.

The seventh annual Commercial Office Market Review compiled by Professional Liverpool’s property group also showed an improvement in demand for mid-market lettings of between 2,500-5,000 sq ft, and fewer deals done at the smaller, sub-1,000 sq ft end of the market.

Professional Liverpool property group chairman Stuart Keppie of Keppie Massie said that even when the impact of the Weightmans deal – the largest letting outside London in the second half of 2011 – is stripped out, the market still showed an improvement in fortunes.

Within the central business district, the amount of space taken by professional services firms increased to 48%, while public sector take-up in the area fell to 8%.

Mr Keppie also argued that availability of Grade A space – classified by Professional Liverpool as any space which has been developed within the last five years – is tightening, with just 257,283 sq ft currently empty and ready for occupation.

Some 173,178 sq ft of this came on board during the year following completion of English Cities Fund’s No.4 St Paul’s Square scheme in the Central Business District.

“There are questions being asked as the future of the market and whether the city is likely to see much new development with so much planned for the city fringe,” said Mr Keppie. “One school of thought is that we should be concentrating on the city centre as opposed to Liverpool Waters.

“Any schemes that do kick off are only likely to do so with a pre-let.”

Mr Keppie said that no accurate comparison could be made with regard to headline rent levels, due partly to the differing levels of inducements offered to attract occupiers but also the number of confidential deals where landlords proved unwilling to reveal terms.

However, the city did at least benefit from an investment deal last year – the first since 2009 as Hill Dickinson’s 1 St Paul’s Square headquarters was sold by Sigma Capital to a private Israeli investor for £30m, reflecting a net initial yield of 7.7%.

Another major issue is the amount of unwanted Grade C and unlettable Grade D space, which now represents almost half (48%) of the 7.2m sq ft of office stock available in the city centre.

“There’s an overhang of space which is there almost on a permanent basis,” said Mr Keppie. “It does beg the question as to what should be done with it.

“People point to the total amount of empty space in the market but so much of it is not in a condition where it can be let easily.”

Outside the city, take-up levels in the city fringe dropped marginally to 50,610 sq ft (2010: 54,000 sq ft) but fell by 52% in out-of-town areas to just 63,834 sq ft (132,080 sq ft). Wavertree was the most popular out-of-town area for which comparative figures are available, where lettings increased by 47% to 19,504 sq ft (13,274 sq ft).

More space was let at St Helens, though, which is one of two new areas (alongside Waterloo) where market research has now begun. In 2011, 22,312 sq ft was let in St Helens and 16,638 sq ft in Waterloo.