Public sector hold-ups hitting office market

CUTBACKS by the coalition Government have started to negatively impact on take-up in the Leeds office market, according to new research.

Property group Ryden said that both Leeds City Council’s 125,000 to 250,000 sq ft requirement and the NHS’s 40,000 sq ft requirement being put on hold had hit the market.

Take-up in the Leeds city centre office market in the second quarter of the year dropped to 48,552 sq ft.

Ryden said: “Government officials announced that around 15,000 jobs (out of 80,000) at the Ministry of Justice could be axed in an effort to save £2bn from its £9bn budget, meaning that any potential relocation to Leeds from London and the South East has been quashed. 

“Industry experts estimated the requirement at around 215,000 sq ft earlier this year but it was put on hold in March and then pulled in May after the election.

“It was also announced that England’s public spending watchdog, the Audit Commission, which employs over 2,000 people and has an office at Leeds City Office Park, is to be scrapped. This will bring over 7,950 sq ft of ‘tenanted’ space to the city’s’ office market.

“The market is fragile following poor performance in Q2 where take up was down for the third year in a row to 48,552sq ft. It had already been hit after Leeds City Council’s 125,000 to 250,000 sq ft and the NHS’s 40,000 sq ft plus requirements were put on hold after the election.”

Steven Jones, office agency surveyor at Ryden, said: “The local property market has been pinning its hopes on these major public sector requirements, with rumours that Highcross’ Broadgate (169,000 sq ft), Deltalord’s The Mint (115,000 sq ft), and IVG’s Latitude Red (122,000 sq ft) would have satisfied them. There is however some optimism as agents look to other potential requirements later this year.”

He added: “It was hoped that had all the public sector requirements come to fruition that this would have spurred speculative development, however unless there is a bullish developer in the market, Leeds might not be able to attract a pre-let for at least the remainder of the year.”