Report highlights record breaking office rents in Leeds

Prime rent for Grade A office space in Leeds has now risen to £38 per sq ft, breaking all records, according to property consultancy Knight Frank.

In the consultancy’s new UK Cities report, published this week, it is revealed city centre rents have increased by 6% over the past 12 months.

Prime office rents have risen by 19% since the start of the pandemic, the second largest increase seen across the Big Six regional cities.

Eamon Fox, partner and head of development at the Leeds office of Knight Frank, said: “With strong occupier demand and supply-squeezed market, forecasts indicate prime rents will reach £40 per sq ft by the second quarter of 2024.

“We have several transactions agreed and progressing through legals at £39 per sq ft, with £40 per sq ft being the next milestone.

“The market is such that transactions are no longer rent sensitive, but amenity and quality is scrutinised more than ever by our occupier customers. When we get this right, we see growth in rents.

“Leeds experienced strong occupier demand in 2023, with the city registering the highest level of annual take-up since 2019.

“Total take-up during the year was at 651,461 sq ft, 10% above the five-year annual average and a 9% year-on-year increase.

“During 2023, the number of deals rose slightly from the previous year to 127 completed, 17% above the five-year annual average.

“With above average levels of take-up in 2023, demand for best-quality space was strong, accounting for 74% of annual take-up.”

The largest letting of the year was to Lloyds Banking Group, which took 124,400 sq ft of grade A space at 11 & 12 Wellington Place in quarter one. This was the largest occupier deal to be completed across all of the major UK regional cities last year.

Availability of Grade A space stood at 176,286 sq ft at 2023 year-end, 66% less than the previous year and 34% below the 10-year average for Leeds. The level of grade A supply at the end of 2023 is the lowest since 2019.

At year-end, 581,984 sq ft of office stock was under construction with delivery due this year. Of this, 295,939 sq ft is speculative.

Meanwhile, owing to geopolitical instability, investment volumes were subdued in 2023, finalising at £80.4m, 65% short of the 10-year annual average.

The largest investment transaction was the sale of the BT Building, One Sovereign Square, to Citi Private Bank for £38.5m.

Overseas investors accounted for the greatest share of annual investment turnover, at 56%, owing largely to the above deal, and with capital coming from both the Middle East and South Africa.

Click here to sign up to receive our new South West business news...