Leeds office market picks up

THE supply of immediately available grade A office space in Leeds has increased from 350,000 sq ft at the end of 2007 to 460,000 sq ft at the end of last year, according to GVA Grimley’s new Regional City Centre Office Market report.

GVA’s spring 2009 report researches the country’s nine major city centre office markets.

It highlights that over the last year, prime rents in Leeds increased from £25 to £26 sq ft in 2008 and a total of 266,000 sq ft of grade A space was taken up, the highest level since 2004.

The report also revealed that, despite concerns about a potential under supply of prime space, the traditional city centre boundary has expanded and new developments, offering larger floor areas, have been completed outside the traditional office quarter.

These include 60,000 sq ft Livingstone House at Clarence Dock to the south east of the city and BAM’s 116,000 sq ft speculative new build, Latitude Red to the west of the city.

Dan Hodge, head of office agency at GVA Grimley’s Leeds office, said: “Leeds was in a strong position at the start of the economic slowdown as vacancy rates were only at around 10%, so we do not have the situation of oversupply experienced in many of the other regional centres.

“Last year saw a strong level of take-up and the supply of immediately available prime office space increased by 30% to 460,000 sq ft.

“Construction activity has decreased considerably over the last year, with only 206,000 sq ft due to come to market in 2009 and no new developments predicted for 2010, which will further balance supply and demand.”

Around the country, the economic recession is being increasingly felt in terms of occupier demand for prime office space, at a time when a significant number of major schemes are completing.

Available Grade A space across the nine cities analysed increased significantly during 2008, from 2.4m sq ft to 3.8m sq ft by the year end, a rise of nearly 60%.

The report said Leeds had experienced “strong and improving performance over the past few years” and that grade A supply shortage had now eased.

“The largest of the opportunities for Leeds is the area sandwiched between Wellington Street and Whitehall Road which is being marketed by the West End Partnership,” said GVA.

The report added: “In terms of the investment market, since the peak of the investment market in mid 2007, prime office yields are now above their average level since the Regional City Centre Office Market bulletin began monitoring in 1990.

“The market is now priced favourably and yields should fall in the medium term, making the pricing of commercial property look increasingly attractive.

“In Leeds, the prime yield has moved up from 4.75% at the peak of the investment market to 7.25%, above the average since 1990 of 6.37%.”