Demand for regional office space at highest level since 2008
DEMAND for office space across the UK is at its highest level since 2008, with Leeds cited as the first city to see take-up levels return to pre-recession levels.
Latest analysis from CBRE says the resumption of a more sustained period of economic growth, and a renewal of business confidence, has translated to a clear upturn in leasing activity during 2013.
Take-up levels have been boosted by a number of larger floorplate transactions across the country. These larger deals all contributed to the strong performances in Leeds, Edinburgh, Glasgow and Birmingham.
However, CBRE’s research also reveals that there has also been an increase in the number of smaller floorplate deals favored by small and medium sized enterprises (SMEs). For many regional cities, deals to this group of occupiers form the bedrock to a strong and sustained office market.
Andrew Marston, CBRE’s director of research for national office markets, said: “Occupier data for the second half of the year has demonstrated that business confidence within the UK’s largest cities is gradually improving. The risks that prevented many businesses from committing to acquiring new office space over recent years have now eased, and that situation is increasingly being reflected in enquiries and done deals.”
The stronger demand that has characterised 2013 has also led to the first meaningful reduction in overall supply levels since vacancies peaked in 2009.
Leeds is the first of the regional cities to see supply levels return to their pre-recession level. Meanwhile, secondhand space still dominates supply across the country, although conversion of some obsolete office properties to other uses (including residential through the new permitted development rights) has aided in the process of reducing this oversupply position.
Marston added: “Choice is increasingly limited for new build Grade A space. Only Manchester, Glasgow and Bristol have major new speculative developments under construction, although refurbishment activity is happening elsewhere, notably in Leeds. The lack of supply at the prime end of the market is therefore expected to lead to upward pressure on rents, which we expect to see across many regional city markets in 2014.”
Alex Hailey, senior surveyor at CBRE’s Leeds office, said: “Leeds city centre saw prolific take up in 2013. The year-end figure is up three fold on the previous year and the second highest on record. Although sentiment remains cautiously optimistic in all sectors the market is bracing itself for a chronic shortage of grade A / B+ stock. There is currently only 190,000 sq ft of grade A stock available but circa 400,000 sq.ft of named active requirements which is a significant imbalance. Additionally, there are no new speculative schemes on site and only circa 100,000 sq ft of refurbished stock is expected to be delivered in 2014.
“This needs rapid readdressing if Leeds is to continue to attract inward investment and occupiers.”