LSH report reveals regional office development hotspots

Developers advised to start building now in key regional office locations

Article posted: 01 Dec 2011

In key regional office locations, where grade A supply is restricted, developers should start building now so they can exploit the shortage of stock when the up-turn in demand returns in 2014 - according to the latest research from national commercial property firm, Lambert Smith Hampton.

LSH’s latest research report, National Office Market 2011, states that GDP levels are forecast to return to pre-recession levels by 2013 or 2014, with demand for office space in the UK increasing as a result. LSH’s National Office Market 2011 analysed 33 centres across the country in seven regions.

Tony Fisher, National Head of Office Agency at LSH, said: “Some regional markets will experience a shortage of grade A in advance of others. In larger regional markets like Glasgow, Bristol and Cardiff, the proportion of grade A availability is now below the UK average. This combined with the continued demand for grade A space, points towards these markets being key areas for developers and investors.”

Across the UK, in the year to date, take-up of grade A was 35% of the total, which is up on the average of 28% over the last five years. Regional office take-up is already on track to match 2010 and grade A supply will soon come under pressure in some markets. 

Tony added: “On the face of it availability across the UK stands at 59.7m sq ft, which is 9m sq ft more than the market average. However, only 27% is grade A, and as occupiers shy away from secondary space we could argue that the stock currently available will not be able to fulfil occupier demand.”

In Glasgow only 15% of total availability is considered to be grade A, which is the lowest of the all the major regional centres. During the year to date, take-up of grade A space accounted for 40% of the total, as occupiers took the opportunity to acquire prime space on competitive terms. This has left relatively little grade A office space in Glasgow city centre.

23% of the total available stock of office space in Bristol is grade A, which equates to 500,000 sq ft. Of this space, 350,000 sq ft is in the city centre, which is where most occupiers want to be located. This level is low in comparison to other large UK centres, including the markets for office space in Birmingham, Manchester and Leeds.

At just 200,000 sq ft (16% of the total), there is only six months supply of grade A office space in Cardiff at current take-up levels. The majority of the available grade A space is located out of town on smaller floor plates, which is likely to be considered undesirable by many occupiers.

Commenting on how the market should respond, Tony concluded: “While demand will not return to pre-recession levels until 2014, any development that commences now is going to take two years to be finalised. With only 1m sq ft currently underway in the regions now is the time for developers to start putting their spades in the ground. Some bullish developers and investors could even profit sooner by refurbishing existing stock in markets where grade A stock is dwindling.”

Click here to view an interactive e-version or download a PDF version of National Office Market 2011.

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Posted by Sara