Member Article

Leeds office rents to hit a record high - Knight Frank

Office occupier take-up in Leeds continued to show strong demand during the first quarter of 2016 with the out-of-town market outperforming the city centre for the first time in four years.

According to global property consultancy Knight Frank, a total of 140,000 sq ft of office space was transacted in the out-of-town market between January and March this year. This compares with a total of 136,668 sq ft of city centre office space taken up in the first three months of 2016.

Headline office rents in Leeds city centre are currently £26.50 per sq ft and are expected to rise to £28.00 per sq ft by the end of the year, a new record.

Meanwhile there is currently 150,000 sq ft of available Grade A office space in Leeds city centre, which will soon be addressed with the delivery of new office developments over summer this year.

Eamon Fox, partner in charge of office agency at Knight Frank’s Leeds office, commented: “Activity was buoyed by the first pre-let at Kirkstall Forge which saw Zenith Intelligent Vehicle Solutions take 45,000 sq ft in what was the largest out-of-town office deal for over two years.

“Of the 25 out-of-town deals to complete in the first quarter of 2016, five were over 10,000 sq ft. A healthy combination of volume and size of deals over 10,000 sq ft means out-of-town market conditions are arguably at their most buoyant for four years,” said Mr Fox.

In Leeds city centre, 22 occupier office deals transacted over the first three months with an average size of 5,500 sq ft. Just three deals over 10,000 sq ft completed: RSM securing 25,539 sq ft at Central Square, the letting to Hestview Ltd of 39,605 sq ft at No 6 Wellington Place and Dentsu Aegis Network agreeing a pre-let on 13,800 sq ft at 6 East Parade.

Mr Fox added: “With five city centre schemes – 5 Wellington Place, Central Square, 6 Queen Street, 6 East Parade and 3 Sovereign Square – all scheduled to reach practical completion in Q2/Q3 this year, Leeds offers a UK leading choice of new offices backed by competitive rents and access to a diverse and skilled workforce. These all make our city very attractive to both local businesses as well as companies looking to relocate from the expensive and overcrowded London and south-east markets.”

Meanwhile the Leeds investment market remains one of the UK’s most attractive across all sectors, offering good opportunities for investors, and whilst there has been yield compression, particularly for prime assets, this is a trend reflected across UK Regional markets and one which will stabilize, according to Knight Frank. Yields are currently 5.25 per cent.

The sale of the iconic St Paul’s House for £23.7 million to EPIC UK demonstrated the strength of the Leeds investment market.

Henrie Westlake, investment partner at Knight Frank commented: “This historic 19th century building, which overlooks Park Square, had recently undergone radical renovation work to restore it to its former glory. The deal showed a net initial yield of six per cent.

“St Paul’s House is arguably the most striking building in the city centre and now its refurbishment is complete, it is a tremendous mixture of the old and the new. It boasts a high-quality Grade A office specification internally which, when combined with the stunning exterior façade and its unrivalled location, offers one of the most attractive working environments in Leeds.

“Whilst we are passionate about all of the properties we deal with and the clients we act for, this is a very romantic story as it is an important chapter in this building’s proud history. It is also a graphic illustration of how Leeds is becoming ever more attractive to investors from across the UK,” said Mr Westlake.

This was posted in Bdaily's Members' News section by Robert Beaumont .