On the back of the second highest year on record for office occupier take-up in Leeds and office employment growth of nearly 3.5% pa forecast over the next three years, experts at surveying firm JLL say a decisive year lies ahead for Yorkshire’s property market.
While volatility in the equity markets and the imminent EU referendum are adding to investor and occupier nervousness, JLL forecasts that the UK should still see robust growth of over 2% this year. Leeds will experience Gross Value Added (GVA) growth of 2.2% putting it at similar levels with the North West and West Midlands. The growth of office sector employment in the region overall is forecast to outperform both Birmingham and Glasgow through to 2018.
Jon Neale, head of UK Research at JLL, said: “With low inflation, rising wages and expanding firms helping to buoy demand across the spectrum – Leeds is well placed to benefit. While the city may lag behind London, it will remain one of the strongest cities outside the capital and is well placed to serve companies looking to ‘nearshore’ outside of the M25. Higher graduate retention rates, and greater infrastructure and skills investment through the devolution packages, will further help the position of both Leeds and Yorkshire in the longer term, with benefits for both commercial and residential markets.”
Leeds city centre office take-up over the last three years has been substantially ahead of the five-year average with JLL reporting the continued resurgence in the out-of-town market.
“There is a lot of positivity in the market following 2015’s exceptional level of office leasing activity”, said. Richard Thornton, director of office agency in JLL’s Leeds office.
“A number of office enquiries which did not commit last year should do so this year, not to mention the potential for numerous lease events to also activate. JLL has over 500,000 sq ft of named occupier requirements (over 10,000 sq ft) with in excess of 650,000 sq ft of confidential and agent led requirements on our database.
“Leeds has enjoyed a revival over the last five years with a host of new office developments, capable of attracting the best occupiers that Leeds has become synonymous with, taking shape on the city’s skyline. The future is therefore looking bright with occupiers continuing to exhibit a flight to quality to new and refurbished space and with a preference for large floor plates. With some early lettings the market will sit up and consider further speculative development.”
Looking at the region’s logistics market, Rich Harris, director of industrial agency at JLL believes the continued growth of online retail will drive demand for logistics space from retailers and parcel operators.
Rich Harris added: “Our changing shopping habits, growing online sales and a wider move to more same day or next day delivery will drive demand for more parcel/postal facilities and local distribution depots. We have already seen this with FedEx taking 50,000 sq ft at Connex 45 in Leeds, Yodel at Selby and DPD at Ozone Park, Howden and we anticipate further requirements over the next couple of years.
On the prospect of an EU referendum this year, Mathew Atkinson, director, capital markets at JLL, believes that the implications of a Brexit could pose a risk to future property investment.
Mathew said: “The rising prospect of a Brexit vote in the referendum will lead to nervousness and the potential for caution and inactivity in the commercial property market, similar to what we witnessed in Scotland.
“We anticipate a “wait and see” approach – if it’s a stay in vote then it will be business as usual. If there was a vote to leave this will shake confidence and the initial shock to the markets could be followed by some years of uncertainty as we work out what the impact of the new trading relationship with our biggest market is. In the long term, provided we still have economic stability, the property market will continue to be an attractive place to transact given it is one of most mature and established markets in the world and still viewed as a relative safe haven.”
