JLL reports on impending regional office supply shortage

Just 38,000 sq ft of new offices to complete this year according to JLL’s research

Article posted: 25 Apr 2011

The squeeze on supply of Grade A office space in the UK continued over the first quarter of 2011 across the country’s regional property markets according to new research by Jones Lang LaSalle. Although, currently 488,500 sq ft of new office space in Edinburgh, Leeds, Birmingham and the Western Corridor region is under construction, only 38,000 sq ft is scheduled to complete this year with no new space under construction speculatively in either Glasgow or Manchester.

With the exception of the Western Corridor and Manchester markets, the response to the impending office supply shortage remains limited, with no new speculative developments due to commence this year in the rest of the UK regional markets monitored. Grade A vacancy rates across the majority of the six key UK regional markets are below 4%, albeit approximately in line with their five year averages, but trending downwards.

James Finnis, head of Jones Lang LaSalle’s National Offices team in England said: “We expect developers to begin positioning themselves strategically to take advantage of the impending shortage of Grade A supply; the lack of speculative development funding will mean that the pipeline will remain severely limited over the forthcoming year.”

Take-up of office space in Glasgow, Edinburgh, Birmingham, Leeds, Manchester and the Western Corridor (which constitute JLL’s six key regional markets) reached 940,000 sq ft over Q1 2011, down 23% compared with the same period last year. Leasing activity is likely to improve over the coming months, however given the mixed outlook for the economy, occupiers are expected to remain cautious; Jones Lang LaSalle forecasts that the total office take-up for 2011 across the six key regional markets to be at similar levels to 2010 (5.4m sq ft).

The growing polarisation between Grade A and Grade B office space also continued over the first quarter of this year as prime rents increased for office space in Birmingham, Glasgow and the Western Corridor and remained stable in the other three markets. Further growth in prime rents is expected this year, driven largely by the anticipated shortage of Grade A space.

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Posted by Sara