The outlook for Leeds’ office market is upbeat, with signs of confidence gradually returning, according to new research by BNP Paribas Real Estate, the leading property adviser. Whilst 2013 take-up is not expected to reach pre-recession levels, it is expected to outperform last year’s level.
The Leeds office market reported a strong first quarter, with take-up rising in both the city centre (CC) and out of town (OOT) markets. In Q1, CC take-up reached 235,000 sq ft, which was a 51% increase on the 155,850 sq ft achieved in Q1 2012. Q1 also saw the welcome return of some pre-letting activity.
With regards to Leeds office investment market, Q1 2013 totalled £5.8m, down 47% on Q1 2013 when £11m transacted and significantly down on Q4 2012 when £20.7m transacted. More positively, since the end of Q1 2013, momentum has picked up with the Q2 transaction volume already exceeding Q1.
Michael Leonard, director of Leeds lettings & sales at BNP Paribas Real Estate, comments: “With large scale speculative developments grinding to a halt over recent years, the city’s availability level will continue to decline. Whilst the market will see development return in 2013, this will be highly selective, as developers continue to wait for a significant pre-let deal before commencing onsite. As CC availability tightens during the course of the year, there is potential for a small increase in the headline CC rental level.”
Joanne Warren, associate director within BNP Paribas Real Estate’s research department, adds: “As the year progresses, the Leeds office market is likely to become increasingly attractive to the growing number of investors priced out of London and looking for opportunities to secure higher returns in key UK regional centres. This will result in a pick-up in the transactional volume as the year progresses. However, at the end of Q1 2013, Leeds CC availability was estimated at 1.6m sq ft, down from 1.9m sq ft in Q1 2012.”
Leeds headline rent has remained unchanged at £25.00 per sq ft since Q1 2011. Tenant inducements remain important, with tenants typically receiving three years rent-free on a 10-year term.
