‘Healthy outlook’ for office market
THE region’s property professionals have reported positive signs of improving conditions in Leeds’ office market.
CB Richard Ellis says a number of major office deals in recent weeks has resulted in the take-up of Leeds offices in the first half of 2011 being up 37% on the same period last year.
Its report highlights how large occupiers are finally taking advantage of the city’s tenant-orientated deals signalling positive news for the long-term recovery of the market.
Director of office agency at CB Richard Ellis in Leeds, Jonathan Shires, said: “The first half of the year has seen a total 187,626sq ft of take–up in Leeds city centre which is a 37% increase on the first half of 2010 despite a slow start to the year.
“Eighty-one per cent of these transactions have taken place in the last quarter including the largest transaction which saw ASDA sign up for 38,039 sq ft at The Mint. The service sector also dominated city centre take-up with the likes of 12 and Redmayne Bentley also committing to leases in the second quarter.”
“The outlook is encouraging with a number of larger requirements totalling over 500,000 sq ft in circulation and there are also just over 1m sq ft of lease events due in Leeds over the next four years which will further help the market return to take-up levels in line with the ten year average.”
Colliers International also reported that office space in central Leeds is being absorbed at an accelerating rate.
Colliers’ Net Stock Absorption (NSA) study shows that physical occupation rose by a significant 141,482 sq ft in the first half of 2011, indicating the largest increase in four years.
Grade A absorption experienced a positive uplift of over 130,000 sq ft alone compared to a decline of 26,899 sq ft in the second half of 2010. Nearly 100,000 of this was in the city core.
Roddy Morrison, head of office agency at Colliers’ Leeds office, said: “Improvements in absorption in Leeds is being driven primarily by activity in the city core and in particular Grade A space where availability fell for the first time since the first half of 2009. It has reached its highest level since we began recording absorption levels in 2007 with overall occupancy rising to 77.6% compared to a cyclical low of 68.7% in recorded in June 2009.”
Property professionals at global real estate services firm DTZ in Leeds also say they have seen recent signs of improvement in rent collection and tenant retention in Yorkshire.
“Retention rates within the regional office letting market have increased considerably during the past three years,” said Eamon Fox, associate director in DTZ’s office agency.
“We have seen occupiers become more risk adverse, deciding in most cases that renewing as opposed to relocating is the safer of the two options. Relocation costs, coupled with dilapidations and new fit out costs means it is very difficult to obtain a cost neutral position if considering new premises.”
Meanwhile, headline office rents in Leeds will rise to £25 per sq ft by the end of this year, according to Knight Frank’s latest Regional Office Market Presentation (ROMP).
The research says that headline rents in Leeds have remained steady at £24 per sq ft for the past 18 months, having fallen from £27 per sq ft at the height of the property boom.
According to property consultant, the expected rise in rents has been caused by the increased take up of Grade A office space in the city and the consequent decrease in the availability of quality office space.
