Occupier interest in the key Yorkshire cities continued to increase during 2015 which saw above average take-up figures in the likes of Leeds, Sheffield and York. Jonathan Shires, CBRE’S Senior Director of Office Agency in Leeds, provides a snapshot of each of the region’s key markets and an insight as to what may lay ahead for the industry in the coming year.
Overview
Although the Referendum decision has had an impact on confidence across the region, the lack of take-up can probably be accounted for by the lack of lease events in 2016/17 due to subdued market activity in 2010, 2011 and 2012. The lack of new occupier entrants into the cities also needs to change to increase activity and provide a wider audience for new speculative and pre-let schemes to target. At present, the regional cities offer great value accommodation when compared to other centres around the UK, which combined with the lifestyle offering, needs to be maximised by all concerned to attract occupiers to God’s County!
Leeds
Leeds City Centre saw take-up of 680,000 sq ft which exceeded the 10 year average for the third year running and saw a record breaking fourth quarter of 267,000 sq ft. Like most above average years, 2015 take-up included several large pre-lets to Sky Academy (100,000 sq ft) at Leeds Dock, Addleshaw Goddard (51,531 sq ft) at Sovereign Square, PwC (49,650 sq ft) at Central Square and Equifax (19,784 sq ft) at Wellington Place.
H1 2016 has seen more subdued take-up with only 195,000 sq ft of transactions completed so far. Highlights of H1 were; 13,880 sq ft pre-let to Dentsu Aegis Network at 6EP, 25,000 sq ft pre-let to RSM Baker Tilly at Central Square and 39,600 sq ft let to SKY Bet at 6 Wellington Place.
Total immediately available Grade A space in the city centre sits at around 500,000 sq ft following the completion of four speculative / part pre-let buildings at Wellington Place, Central Square, Sovereign Square and 6 Queen Street
The Leeds out of town market also exceeded the 10 year average seeing some 268,041 sq ft leased, and this market resurgence has continued in 2016 with take up in H1 standing at almost 300,000 sq ft following a series of major transactions at White Rose Office Park with the sale of the 73,800 sq ft MC2 and the letting of the 39,442 sq ft OPTIM, both to The Gorse Academy. The sector also saw its first pre-lets since HSBC in 2014 at Kirkstall Forge, Zenith Provecta committed to 45,000 sq ft and CEG to 10,000 sq ft.
On the back of positive growth we have seen the first speculative / part pre-let development out of town for almost a decade with Scarborough on-site developing some 32,000 sq ft at Thorpe Park and most notably CEG on site with 109,000 sq ft at Kirkstall Forge. Quoting rents for these buildings are now north of £23 psf which shows good rental growth.
Going forward, Leeds is well placed to accommodate occupiers already within the city and those looking to invest and nearshore due to the forthcoming availability of further new and significantly refurbished space.
York
The York office market has historically been driven by rail related service occupiers who typically seek space no more than a 10 minute walk of the Station. More recently, Government and NGO’s have dominated take-up accounting for 37% of take-up since 2008.
Like Leeds, York saw above average take-up in 2015 reaching an impressive 125,000 sq ft. This included the significant deal to bring Hiscox Insurance’s new Customer Experience Centre to the city, who now occupy some 53,000 sq ft at Stonebow in the City Centre. Availability in the city centre is highly limited due in part to the lack of speculative development or refurbishment projects but more so from the increased demand from residential developers for conversion to apartments. There are plans for a major office and residential scheme at York Central, a site which sits to the rear of the station. This could be game changing for the city if it can attract further blue chip occupiers such as Hiscox to anchor the scheme.
Availability in the out of town market is greater than the city centre on schemes typically around the ring road and A64 corridors.
Sheffield
Following a period of subdued occupier activity, demand for Sheffield wide office space leapt in 2015 hitting 487,433 sq ft, some 200,000 sq ft above the 10 year average. Several of the larger transactions in 2015 were University led with both Sheffield and Sheffield Hallam on the acquisition trail taking out office buildings for educational use.
2016 has been boosted by the recent announcement that HSBC has committed to take 140,000 sq ft at the new Sheffield Retail Quarter so expect to see above average take-up once again in the city this year. The proposed retail quarter works will further cement the location as the prime commercial core in the city and public realm is already in place linking this area to the train station.
The supply of suitable buildings is now becoming limited with the availability of Grade A supply at its lowest level since 2007 with only 12-18 months’ supply remaining. This has led to the first speculative buildings since the recession going under construction at 3 St Paul’s Place and Digital Campus.
Prime rents for Sheffield are set to increase to £23.50 on the new build options which follows the £22 psf achieved at 3 St Paul’s Place on a pre-let of 16,000 sq ft to Arup. This is a 10% rise on the previous headline achieved on lettings to Sky and Kennedys at Digital Campus in 2011.
Conclusion
Times are undoubtedly challenging and could be for some time, following the referendum vote earlier in the year, however the Yorkshire property market and its professionals are resilient and resourceful and will continue to promote the wider Leeds City Region’s benefits.
The forthcoming opening of John Lewis in Leeds and the commencement of the Retail Quarter development in Sheffield will help further boost the region’s profile following on from the sporting successes of the Tour de France Grande Depart, The Tour de Yorkshire and the Rio Olympics. It is key that we as professionals continue to remain positive and promote the wider regional benefits to all our occupier, investor and landlord clients.
