Record breaking office take-up forecast

OFFICE take-up in Leeds this year is on course to break the all-time record of 2004, according to latest research.

Property consultancy Knight Frank says that although take-up in the third quarter of 2013 was significantly restrained compared to the first half of the year, with only 101,100 sq ft of office space leased between July and September, the 2004 record of 600,000 sq ft is likely to be broken by the end of the year.

Elizabeth Ridler, the partner specialising in office agency with Knight Frank in Leeds, said: “With 539,000 sq ft already leased at the end of the third quarter, the 2013 take-up is markedly above the five-year annual average of 386,000 sq ft and is forecast to break the 600,000 sq ft barrier.

“Since the end of September, KPMG have taken 28,000 sq ft at Highcross’s Broad Gate and there are notable outstanding requirements including Sky (60,000 sq ft), who are rumoured to be considering both Wellington Place and 6 Queen Street for their future relocation. So it is extremely likely that the 2004 record will be broken.”

She added: “It is fair to say that the frenzied activity of the first half of the year has slowed down during the third quarter, with only 23 deals transacted. The Leeds office market was largely dominated by small transactions under 5,000 sq ft, which accounted for 74% of total deals.

“However, positive market sentiment along with a solid level of new enquiries should contribute to a strong final quarter. Several major pre-let deals are in discussion, potentially totalling more than 170,000 sq ft. The largest deal of the quarter saw the NHS Leadership Academy take 22,510 sq ft on a short-term lease at 3 The Embankment.”

Ms Ridler said that average headline rents in Leeds were now £25 per sq ft, having fallen from £27 per sq ft at the height of the market. Net effective rents were £19 per sq ft, but were expected to rise to £20 per sq ft by the end of the year.

She said: “With supply constrained due to a lack of speculative development and refurbishment, rental incentives are beginning to edge in.

“The lack of quality prime stock will continue to contribute to increased activity in the secondary market through to the end of the year. The dynamics of supply and demand now arguably support the case for speculative development. However, developers will want to see clear evidence of prime rental growth before plans are seriously brought forward.

“Looking ahead, the recent activity at Broad Gate has left the prime core with an acute shortage of stock with only a few buildings able to satisfy the larger requirements. This can only lead to an increase in demand for good quality refurbishments in the prime core.”