Brighter prospects for regional offices – GVA
GVA’s latest quarterly review of the nine largest UK regional office occupier markets has found that prospects have brightened considerably since the end of 2011. The firm says take-up was average during Q1 2012 at 1,611,000 sq ft, 2% above the quarterly average in what is traditionally the quietest quarter of the year. It is also confident that activity will increase during Q2 and Q3 thanks to a large number of requirements. “The improved sentiment is encouraging occupiers with upcoming lease events to start their search while there is still quality stock available,” it notes.
The overall take-up figure breaks down into 944,000 sq ft taken up in city-centre deals, which was 7% below the quarterly average, with the remaining 666,000 sq ft of out-of town activity running at 17% above the average figure. Birmingham, Bristol, Manchester and Newcastle all recorded more than 100,000 sq ft of out-of-town deals, with little out-of-town activity seen elsewhere.
Within city-centre deals, take-up of Edinburgh office space and offices in Leeds was well above average, each boosted by a large deal: the 63,500 sq ft freehold sale in Leeds to the Medical Protection Society and a 47,800 sq ft pre-let in Edinburgh to Brewin Dolphin. Take-up of offices in Manchester was also above 150,000 sq ft for the quarter thanks to a larger number of smaller deals.
Looking at the requirements currently active, GVA notes that there is up to 500,000 sq ft of named demand in Edinburgh and in Manchester – similar to the amount of Grade A space available in each city. There has been an increase in the number of viewings of office space in Newcastle city centre, the firm notes, and there are half a dozen enquiries for space over 10,000 sq ft. Enquiries of this size are also increasing in Leeds, dominated by professional and business services occupiers. Thanks to government incentives there is a healthy level of inward investment into the Welsh capital, the firm notes, with requirements for office space in Cardiff including 30,000 sq ft for Capita and 80,000 sq ft for Hugh Jones Solicitors.
Development remains subdued but GVA notes a few schemes being prepared for an upturn in activity, including a 170,000 sq ft development of office space in Glasgow for which planning permission has been secured and a 133,000 sq ft refurbishment of offices in Birmingham due for completion in the final quarter of this year.
“With little development and an increase in lease expiries over the next three years, there are concerns that the choice for occupiers will become restricted. However, there remains a surplus of secondary stock and refurbishment and pre-let will continue to be the main provider of new space,” the firm notes.
Liverpool has seen a rise in demand thanks to sizeable inward investment and relocation requirements, GVA says. There are no new buildings or substantial refurbishment developments under construction or on site in the city, so the schemes currently in the pipeline are likely to require a substantial pre-let before work begins. However, if the named demand for Liverpool office space materialises, the firm thinks that headline rents could increase during the next 12 months as a result of the lag in development.
Headline rents during the past six months have fallen in Edinburgh (£25.50 per sq ft) and Leeds (£25.00), while in Manchester, where headline rents are £29.50 per sq ft, there has been an increase in net effective rent with a reduction in rent-free periods to 24 months on a 10-year lease. In Cardiff, although headline rents have risen to £22.00 per sq ft, rent-free periods have also increased to 30 months, so the net effective rent has been reduced. Rent levels in the other five cities are unchanged.
it’s interesting that the increase in the figures of office space and the commercial property market are following that of residential property, with both markets seeing higher activity in the North, NW particularly, and in Scotland.