Office market success calls for pre-let revival
A DRASTICALLY limited amount of quality office space has resulted in Leeds being in danger of losing out to other regional markets, according to a property expert.
Colliers International has released its latest Net Stock Absorption (NSA) study for the first half of 2013. Roddy Morrison, head of offices in Leeds, said the city has now reached a “tipping point” in terms of supply and demand.
The NSA study shows that the Leeds office market has heralded the strongest levels of Grade A take-up and absorption (physical occupation of available stock) since before the credit crunch.
Grade A absorption reached 127,348 sq ft, which is the highest figure since June 2007, and the largest half year take up of the ‘big six’ regional markets. Central city office take up in the first half of 2013 was more than the entire figure for 2012 and take-up of offices in central Leeds has now risen in each of the last seven half year periods. There were nine significant deals above 10,000 sq ft compared to just seven for the whole of 2012.
Morrison said: “This success is fantastic for Leeds, but as a consequence, we have now reached a tipping point in terms of supply and demand.
“The city is now really lacking in Grade A and decent Grade B available office stock, with many of the buildings ripe for refurbishment not available until after existing occupiers vacate to new build solutions in 2015-2017.
“We need more stock and speculative development is key. We are now in a pre-letting market and those who dare will win. The ‘ground-up’ pre-let is however a complete rarity. There is tangible evidence that occupiers will commit at an early stage, but only where they have something that is truly deliverable. As such, even where speculative development is underway, we would only anticipate modest amounts of space will come to the market upon completion.”
Morrison said Manchester and Birmingham have experienced similar success over the last two years and are more able to sustain delivery against demand with more existing stock but also, crucially, have speculative schemes coming out of the ground.
He said: “Serious occupiers need to meaningfully engage now before they lose out. Failure for occupier and developers to do so will mitigate the recent successes within the central Leeds office market and see our city lose out to the other centres within the next 12-24 months.”
The recent acquisition of 76,413 sq ft at Broadgate in Leeds for Yorkshire Building Society, brokered by Colliers International in May, was the largest single office transaction in central Leeds for almost 10 years. Jet 2 owner, Dart Group, also agreed terms for 73,100 sq ft at The Mint and KPMG took a pre-let for 61,250 sq ft at Sovereign Square.
Colliers’ NSA monitors changes in office occupation levels by showing the net change in total occupied stock within a given market.
