Positive outlook for Sheffield’s property sector

OFFICE take-up figures in Leeds reached a record level for the final quarter of 2007 and the credit crunch won't dampen demand this year, according to new research.

But a lack of new accommodation coming onto the market could hit the city's prospects, the study claims.

Meanwhile, a commercial property expert in Sheffield has said that any market slowdown may be “a blessing in disguise” for the South Yorkshire city.

Stephen Hodgson, of Knight Frank in Sheffield, said Sheffield's economic growth and diversity into new sectors, including digital media, coupled with the fact most of its schemes are under construction, would help it to continue to prosper and that a market slowdown would allow for a realignment of returns against borrowing on property schemes.

According to property consultants Sanderson Weatherall, office demand in Leeds between October and December was 590,000 sq ft, up from 507,000 sq ft for the same period in 2006.

Despite ongoing requirements for office space this year, Sanderson Weatherall warned that there was a lack of available Grade A space in the city centre with many developments, such as City Square House, not likely to be completed until 2009.

Glenn Levison, director of office agency at Sanderson Weatherall, said although there was a total of 225,000 sq ft of Grade A office accommodation on the market in Leeds, much of it was located within developments such as Clarence Dock and The Gateway on the “fringe” of the city centre.

Mr Levison said: “Whilst on the face of it, the levels of take up over the last year might point towards reasonable supply, once the current schemes and demand profile are considered in detail it becomes evident that there is in fact a severe shortage of Grade A space within the traditional prime city centre core.

“I certainly believe that if anything it will be this, rather than the general global economic uncertainties, that will impact most upon the 2008 figures.

“Over the last 12 to 18 months, the completion of the likes of Whitehall Riverside, Bridgewater Place and Wellington Place meant that there were a number of prime city centre buildings on the market. But these are now almost fully let and have not been replaced with similar stock in such good locations.

“This is going to have a significant effect on the city's ability to attract inward investment in the form of footloose national or international requirements, as they are usually not prepared to wait this long.”

Mr Levison said developers were becoming increasingly nervous about starting speculative developments on site and increased build costs and the abolition of empty rates relief was heightening tensions.

Mr Hodgson, proprietary partner at Knight Frank, said Sheffield had many positives looking forward.

He said: “Sheffield's economy has diversified hugely since previous recessionary times, making it far more robust. Also, the fundamentals of long term investment in commercial property are still extremely strong with the twin benefits of both rental and capital growth comparing favourably with the equally volatile stock market.

“Sheffield is very fortunate with the timing of this lending crisis as many of the current schemes are off the drawing board and under construction.

“I personally expect markets to remain slow until the middle of 2008 with gradual improvements taking place. By then, book values of commercial properties will have been reduced, which will contribute to an easing of the market. One huge benefit of this will be to keep supply under control and more in line with demand.”