Flat commercial property market in Q1
TAKE-UP of office space in Leeds fell back in the first quarter of 2010 while prime headline rents were unchanged across the region, according to new research.
The latest DTZ Research UK Property Times market reported take-up of regional office space slowing in five of the nine UK regions during the first quarter of the year.
Aggregate office availability was broadly unchanged after increasing 55% over 2008 and 2009. Prime headline rents were unchanged across all regional office markets.
In Leeds, take-up fell back between January and March, but remained relatively healthy at around 85,000 sq ft, made up of a larger number of smaller deals than occurred in the previous quarter.
“Unlike most other regional markets, the public sector has a number of large, credible requirements in Leeds, so although the market is fragile, annual take-up is expected to increase slightly in 2010,” DTZ said.
Headline rents in the city are £27/28 sq ft, however these are “exceptional” and “the consensus is that prime headline rents remained stable at £25 per sq ft in Q1”.
Eamon Fox, associated director at DTZ in Leeds, said: “Undoubtedly rents have come under pressure, particularly within the Cat B/C range.
“We are seeing occupiers continue to chase value, location and quality. It is refreshing to see the mentality of ‘landlord conditioning’ dilute itself. More occupiers are moving due to their desire, as opposed to necessity, and it’s very fair to say that in general requirements are more credible.”
Martin Davis, head of UK markets research at DTZ, said: “The start of the year was characterised by a slowdown in market activity for many regions and aggregate UK regional take-up edged down in Q1. Activity was focused on the lower-sized end of the market in Q1 after the fulfilment of several large, Grade A requirements at the back end of 2009.”
In contrast to the occupational market, the DTZ Research Property Times reports show that investor demand in the regional office markets continued to outweigh limited supply in Q1 and prime office yields in Leeds compressed an estimated 0.75% to 5.75%.
Mr Davis added: “There has been a slight pause in investment market activity over the last six to eight weeks with increased caution over market pricing, the end of quantitative easing and potential rises in gilt yields.
“However, UK institutional portfolios are still heavily cash-skewed and a more immediate consideration will be getting this cash invested in a supply-constrained market in order to improve portfolio performance.”
