Q1 activity boost in Big Six office markets – Jones Lang LaSalle
Total occupier take-up of office space across the UK’s ‘Big Six’ regional markets reached a million sq ft in Q1 2013, says Jones Lang LaSalle. This is an increase of 25% compared with a year earlier; although there were regional variations, the total figure was 15% ahead of the three-year quarterly average level of 880,000 sq ft.
Jones Lang LaSalle says the total was boosted by strong activity in Manchester offices, and the return of pre-letting activity for Leeds office space – although it notes that pre-lets are expected to remain rare. The firm says the decision by Bristol City Council to purchase 100 Temple Street for owner occupation “further strengthened the regional picture”. Jeremy Richards, head of Jones Lang LaSalle’s regional office agency, adds that “current demand levels, coupled with two new speculative developments in Glasgow, give cause for encouragement and buoy optimism in the market”.
Vacancy rates across the markets for offices in Birmingham, Bristol office space, Leeds offices, Manchester office space, offices in Edinburgh and Glasgow offices fell from 12.7% at the start of 2012 to just 12.2% in Q1 2013, JLL says.
The firm cautions that while overall supply is gradually being absorbed, vacancy rates remain stubbornly high in some locations. It notes that although the average Grade A vacancy rate across the Big Six markets was just 3.1% at the end of Q1 2013, the development pipeline remains relatively constrained, with only 860,000 sq ft under construction – of which 697,000 sq ft is speculative. However, there are some signs that confidence is beginning to return, marked by two new speculative schemes starting on site in Glasgow, and another beginning in Bristol during Q2. The lack of Grade A supply will continue to drive rents for the very best space, JLL notes – it forecasts aggregate growth of 3.4% per year during 2013-2017 in the major UK cities.
JLL estimates that more than 2m sq ft of office stock in the Big Six markets has been converted into alternative uses in the past two years. Jeremy Richards points out: “Refurbishment of obsolete stock could help to alleviate overall vacancies as well as providing much need new Grade A supply in the regions and some assets, which are unsuitable for refurbishment, could potentially be converted into alternative uses.”
