Following a record quarter at the end of last year, 2015 got off to a strong start, with regional office take-up 11% above the five year average in Q1, according to DTZ. This was the sixth consecutive quarter of above-average take-up, indicating ongoing occupier confidence in the major UK office markets outside of central London.
For the first time since Q2 2012, overall office availability increased in the regions, most notably grade A availability, which increased by over a third. This was driven by various speculative developments nearing completion in a sign of confidence on the part of developers, with over 1.3 million sq ft of speculative space due to be delivered in Manchester and Glasgow alone over 2015-17. Interest in these developments is high, with around a quarter of the space already prelet and DTZ expects further lettings ahead of completion.
Notable schemes include One New Bailey and Two St Peters Square in Manchester; and St Vincent Plaza, 1 West Regent St and 110 Queen St in Glasgow.
The recent increase is off a low base and most cities are still suffering from a shortage of availability. This is particularly the case for grade A stock, which has led to landlords taking a harder stance on incentives. Rent free periods have fallen 28% in the past year and headline rents are forecast to rise 8% on average over the next three years.
Ben Clarke, Head of UK Research at DTZ, said: “The increased speculative pipeline in regional UK office markets is good news for various key occupiers reaching lease events, but the total pipeline is still more than a third lower than completions during the pre-recession 2004-08 period. This strength in prime occupier markets is helping support investment demand, which eroded prime UK regional office yields by a further 20 basis points in Q1.”
Take-up in Manchester in Q1 2015 reached 338,678 sq ft.
Rob Yates, Director, Office agency at DTZ in Manchester comments: “Inward movers are continuing to be attracted to Manchester. In 2014 they accounted for 17% of total take-up, a significant addition to the business sector in Manchester and essential for the city’s growth.
“2015 has already seen a number of large potential requirements from inward movers considering Manchester as a location, given the strong appeal of the regional centre as a business location. Noticeable requirements include international lawyers considering 100,000 sq ft and an insurance giant considering 80,000 sq ft.
“Developers are responding to the demand and improved market conditions with five schemes currently are under construction and another to commence shortly which will deliver over 1m sq ft of new supply. This new space is desperately needed in the city to meet demand with potential pre-lets in negotiation on 25% of the total. It would not be a surprise to see other schemes also brought to the market for delivery in 2017.“
