Subdued regional offices take-up overall, but some active pockets – DTZ
DTZ says take-up of office space in the UK regional office market increased in Q3 to 930,000 sq ft, compared with the 10-year quarterly average of 1m sq ft. But the firm expects the full-year figure to be subdued at around 3.5m sq ft – the lowest annual figure since 2003.
Take-up in Q3 was strongest for Birmingham offices, Manchester office space, and offices in Leeds. Activity was particularly subdued in Nottingham offices and Glasgow office space, which DTZ says is largely the result of fragile macroeconomic conditions and continued occupier uncertainty. “In most cases, tenants are only moving if they have to, or if they have the opportunity to downsize or reduce their costs,” the firm notes. Deals were focused on the smaller end of the market in the third quarter, with the majority below 5,000 sq ft.
But despite the subdued forecast for annual take-up overall, DTZ expects several markets to record stronger take-up in 2012 compared with 2011 – these include Bristol offices, Edinburgh office space, Leeds offices and offices in Newcastle. It also notes that there is a spate of lease enquiries coming up in Cardiff, Leeds and Edinburgh during 2014-2016, which it feels could lead some occupiers to sign pre-lets or early relocation deals in order to secure preferred buildings.
The regional offices market remains highly polarised, DTZ notes. There has been a rising trend of Grade B deals, with Grade A take-up remaining significantly lower overall than for Grade B. Despite this, there is still an “abundant overhang” of Grade B stock, the firm notes, and a shortage of Grade A space due to the lack of new developments. DTZ expects prime rents to rise from 2013 onwards as a result of the lack of high-quality space.
