The strong momentum witnessed across the Big 6* regional office markets last year has continued in to 2018 according to JLL’s latest research. Office take-up for the first three months of this year was 1.3 million sq ft, a 44% increase compared with the same quarter last year (897,270 sq ft) and only 12% down on the 1.5m sq ft transacted in Q4 2017.
Occupier activity across the Big 6 cities in Q1 2018 was boosted by two significant public-sector office acquisitions, part of phase 1 of the government hubs programme. HM Revenue and Customs acquired 157,000 sq ft at Three New Bailey, Manchester and 187,205 sq ft at Atlantic Square in Glasgow.
The flexible office sector, which saw rapid expansion last year, remained active with a number of transactions during Q1. JLL expects more regional deals over the year and markets with fairly limited exposure to this sector, such as Bristol, are expecting rapid expansion over the course of 2018.
Barrie David, associate director in JLL’s UK Research team, said: “Unsurprisingly, office activity in the first quarter was dominated by occupiers from the public administration and institutions sector making up 31% of all take-up. This was followed by the banking and finance and professional sectors which each recorded 24% of all activity.”
Across the Big 6 office markets, there is 2.4 million sq ft of new speculative space currently being developed, of which 65% is new build. Half of all this space is in Manchester, the largest schemes being 2 New Bailey Square (180,000 sq ft) and Landmark (170,000 sq ft). A number of Big 6 cities face a supply gap in 2018, including Birmingham which has no speculative space due to complete this year.
Vicky Heath, associate director in JLL’s UK Offices research team, continued: “Supply of good quality office space remains a key issue in a number of cities, especially Bristol and Edinburgh which both have grade A vacancy rates below 2%. Consequently, we anticipate pre-lets to reach similar levels as 2017 when 22 deals were recorded, meaning that a proportion of this speculative space will be absorbed before practical completion.”
*The Big 6 regional cities are Manchester, Birmingham, Leeds, Bristol, Edinburgh and Glasgow.
