Property agent says out of town office resurgence shows confidence in city’s future

Well over half the office space taken up in Sheffield during the second quarter of 2019 was “out of town” according to newly released market statistics.

The figures, issued by Commercial Property Partners (CPP), showed 39,304 sq ft of the total 68,745 sq. ft take up was outside the city centre.

Meanwhile, Commercial property agents Knight Frank, said Sheffield’s Technology, Media and Telecommunications (TMT) sector is the key driver for the city’s office market in the second quarter. Knight Frank said the TMT sector accounted for 45% of office take-up.

CPP reported a particular increase in demand for Grade B facilities, which accounted for 48,280 sq ft of the total take up, at 70%.

A total of 15 deals occurred over the three-month period, the most significant of which was the take up of 20,000 sq ft by education publishing house Twinkl at Hallamshire Business Park.

The figures also revealed continued activity within the professional and business services sector, with companies such as Etico Group securing 7,803 sq ft at St James House, and Gleeson securing 5,510 sq ft at Europa Court.

Meanwhile, the City Region’s growing number of creative industry businesses accounted for 9,735 sq ft of space, with Egress Software agreeing a five-year lease for a 7,500 sq ft Grade A suite, following a recent announcement to grow its workforce from 90 to at least 120 people in 2019.

Rob Darrington, Partner at CPP, said: “Demand for office space in Sheffield is at an all-time high, especially in the city centre. It’s great to see businesses committing to the Steel City by taking up properties not just in the city centre, but further afield too, showing confidence in the whole region.

“Grade A properties have been in high demand over the last 12 months, resulting in a lack of new stock, which is why we’ve now also seen an increase in the take up of Grade B.

“Following HSBC’s commitment to the Steel city in quarter one of this year, we’ve seen a strong appetite for office space continue from the professional and business services sector, which is great news for the vibrancy and sustainability of the city centre.

“While we have seen an increase in businesses taking up space out of the city centre, it’s worth noting that we are also seeing businesses move to prominent spots in the centre such as Egress Software at Acero, a prime Grade A property.

“It is evident that the commercial property market in Yorkshire is thriving, and Sheffield is a city where office space is in high demand – a demand which has been recognised by developers, evident in the ongoing work on the final building at Sheffield DC and the New Era Square Development.”

Ben White, associate at the Sheffield office of Knight Frank, said: “Following a strong first quarter, letting activity slowed in Q2 2019 reaching 65,545 sq ft, reflecting a more accurate representation of the market.

“As a result, the total for H1 2019 increased to 266,196 sq ft, 34% more when compared to the same period last year.”

“Despite 27,000 sq ft of speculative space being delivered in Q2, Grade A availability remained limited with 85,000 sq ft being marketed in Q2, 71% below the 10 year quarterly average.

“Prime rents remained stable at £25 per sq ft. Our forecasts indicate an increase to £26 per sq ft by the year-end.”

Commenting on investment headlines for the city, Nick Wales, partner at Knight Frank, said: “Sheffield has so far seen a quiet first half of the year with investment volumes reaching £33.45m transacted in H1 2019.

“However, given that volumes reached almost £130m during 2018, with a number of the city’s high profile office buildings changing hands, a more subdued period of activity was expected.

“Q2 recorded the £8.80m sale of Aspect Court at Pond Hill by Regional REIT to Sheffield Hallam University. The educational institution already occupies the building for academic accommodation.

“UK money continues to dominate the market, with activity accounting for 71% of office investment volumes over the past 12 months.”