2011 office space take-up in UK regional market in line with 2010 figures

Cardiff, Glasgow and Leeds witnesses increased speculative development activity in Q3

Article posted: 08 Nov 2011

According to new research by property consultants Jones Lang LaSalle, activity levels within the UK's regional office market is heading towards a year of ‘much the same as the last ’ with aggregate take-up levels for the first nine months of 2011 indicating that year-end totals will be similar to 2010 levels.

Across the eight key markets including office space in Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Manchester and the Western Corridor region monitored by Jones Lang LaSalle combined office take-up totalled over 1.5m sq ft in Q3. This reflected an increase of 22.9% compared to Q2 however volumes were down by -36.3% compared to the equivalent period last year. The economic frailties, which have been evident over recent months, have not yet been reflected in regional office take-up volumes. 

Chris Hiatt, Chairman, National Office Agency at Jones Lang LaSalle said: “Overall leasing activity across the eight regional office markets in Q3 2011 was boosted by a number of larger deals in the Western Corridor region. In contrast, Bristol city centre saw no office leasing activity over 10,000 sq ft to be concluded. Given the mixed outlook for the economy, occupiers are expected to remain cautious over the medium term.”

In response to the impending supply shortage a number of new speculative starts were witnessed in Q3 2011. Currently there is just over 1m sq ft of space under construction speculatively across the eight key UK regional markets which reflect an increase of 14% compared with the previous quarter. This was driven by increased development activity to create new office space in Cardiff, Glasgow and Leeds underpinned in part by pre-lets.

Average vacancy rates fell slightly across the eight UK regional markets, down from 12.6% in Q2 2011, to 12.3% in the third quarter. The picture, however, remained mixed with overall supply continuing to increase at offices in Bristol, Glasgow and Birmingham. 

Prime rents for office space in Manchester and the Western Corridor increased quarter-on-quarter by 5.3% and 1.4% respectively, driven largely by the lack of suitable Grade A supply. In contrast, offices in Edinburgh experienced slight rental softening as take-up activity continued to fall. Elsewhere rents remained stable over the third quarter. Prime rents remain heavily supported by incentives with up to 30 months rent free achievable in most locations. On aggregate UK regional rents have increased by 1.7% compared to the equivalent period last year.

In the regional office investment market, city centre office investment volumes across the eight regional markets totalled over £450m in Q3, an increase of 21% compared to the equivalent period last year (Q3 2010). Prime yields remained stable in the majority of markets, however Q3 witnessed a slight outward movement of 25 basis points at offices in Glasgow and offices in Leeds to 6.25% however investors have continued to focus primarily on office space in Central London and the South East markets. 

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Posted by Julie