Leeds is ‘open for business to UK occupiers’, according to CBRE report

CBRE has reported that the Leeds office occupier market has remained strong, despite the timing of the EU referendum.

CBRE’s latest UK Office Property Perspective report revealed that Leeds experienced mixed fortunes in the second half of 2016, but with a solid supply of Grade A office stock and more currently on-site, the prospects for 2017 fare better than other regional cities where supply is limited.

Despite the devaluation of sterling, falling around 15% since June 2016, regional office markets have proven resilient. Overall take-up across the 10 regional city markets monitored by CBRE was 5.6 million sq ft.

Requirements still continue to circulate, so it remains to be seen the extent to which the EU referendum result will affect occupier demand in the regional sector.

Despite Brexit fears, occupier activity annually appears to have not deterred occupiers from looking for new space, or prompted decisions about office moves.

Key statistics in H2 2016 for Leeds were; take-up of 430,014 sq ft which was an increase of 27% compared to the previous half year, an 8% increase in availability resulting in 1,345,485 sq ft and prime rent of £27.50 which is likely to remain static until the next Grade A deal.

Leeds has also maintained a supply of office stock and 2016 saw a 31% increase in new Grade A space, elevating it above most regional cities.

Headline rents increased to £27.50 per sq ft but average rents are still sub £17.00 per sq ft. While prime stock is limited, interest in the secondary assets is buoyant, although increasingly competitive.

The majority of demand is in the sub 5,000 sq ft bracket, accounting for more than 80% of transactions. Otherwise muted demand is expected in the first half of 2017, as occupiers assess the implications of Brexit.

New schemes for 2017 include the refurbishment completions of Platform (115,000 sq ft) and Benson House (74,000 sq ft), as well as the new build speculative scheme at No. 3 Wellington Place (103,000 sq ft).

The city centre office investment market was slower in 2016. Four deals were signed in H2 of a total value of £77.6m, the largest being the sale of 3 Sovereign Square to Leeds City Council for £43.75m. This brought the year total investment to £178.4m.

Prime yield remains at 5.5% due to limited stock. But pricing is likely to hold up well in 2017 due to increasing investor demand.

Jonathan Shires, senior director of Office Agency at CBRE’s Leeds office, said: “While the city has yet to revisit the peak of 2013, long-term prospects are solid for the office occupier market.

“Leeds is good value compared to the South East, Manchester and Birmingham and the market remains strong with a very healthy supply of Grade A accommodation.

“It was encouraging to see headline rents increasing to £27.50 per sq ft at Sovereign Square, but occupiers can also be heartened that average rents are still sub £17 per sq ft with plenty of good value space available.

“Leeds is definitely open for business to UK occupiers with a supply to suit all sizes and budgets.”

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