Robust office rental growth puts Leeds ahead of six key cities

Leeds recorded the strongest office rental growth figures of the UK’s six key regional office markets in the second quarter of 2022.

JLL’s ‘Big Six’ research, which tracks office take-up, vacancy rates and grade A rental growth across Birmingham, Bristol, Edinburgh, Glasgow, Leeds and Manchester, showed prime rents grew 4.6% year-on-year in H2 in Leeds. Rents grew 3% quarter on quarter in Q2, with Leeds the strongest of the six cities in this period.

Investment activity also picked up in the second quarter of the year, with deals totalling £22.5m completed over the three-month period, compared to just £6.5m in Q1.

Signalling strong demand, the supply of available Grade A office space dipped to 2.9% in the first six months of 2022, its lowest level in two years and below the five-year average of 6.1%.

Demand from the public sector remains a major driver of office space in the region, with the Department for Education’s acquisition of 43,058 sq. ft at 105 Albion Street being Leeds’ largest transaction of the year so far.

Across the six cities analysed in the research, JLL found leasing activity for H1 2022 was slightly ahead of the same period last year. As an average across the six markets rents grew 5.6% year-on-year, while investment levels were up 16% on 2021 and 27% above the 10-year H1 average.

Jeff Pearey, head of Yorkshire at JLL, said: “The strong rental growth rates in Leeds is a positive sign of occupier activity and also reflects the fact that for a while Leeds prime office rents have remained some way behind the other big six office markets, meaning Leeds has been regarded as “good value”. Rental growth was increasingly likely to occur as a result.

“The shortage of Grade A space in Leeds needs to be addressed before it becomes an acute issue. The fact that the Leeds office market is now delivering some very sustainable buildings in response to this will help to cement its standing as one of the most attractive regional locations for businesses and public sector organisations.”

Elaine Rossall, head of UK offices research and strategy at JLL, said: “While the story that is coming through across the six cities is somewhat mixed, the overall data points to a sector that is well on the road to recovery.

“What’s needed now is certainty. As we head into a turbulent economic environment, businesses will need to have confidence in both local and national leaders before setting-up offices and investing in our cities.”

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