Leeds saw the biggest office letting outside of London last year with the GPU’s acquisition of 378,000 sq ft at MEPC’s Wellington Place helping to buoy take up to over 1 million sq ft according to JLL.
Jeff Pearey, Lead Director, JLL’s Leeds office, said: “2017 marked an exceptional year for the Leeds city centre office market. Activity was dominated by the pre-letting of 378,000 sq ft at Wellington Place to the Government Property Unit (GPU) which saw Leeds exceed one million sq ft of take-up for the first time in the city’s history. Even when this deal is removed from the figures, the city still had a really strong year, exceeding the 10-year annual average of 536,000 sq ft.”
Not surprisingly, the Public Administration & Institutions sector accounted for 41% of all office take-up in Leeds last year but there was also strong performance from the Service (24%) and Professional (13%) sectors. Following the increase in office rental values seen in the first half of last year, headline prime rents stabilised at £28 per sq ft for the rest of 2017 although JLL forecasts further growth in headline prime rents during 2018.
The strong occupational demand seen in 2017 has resulted in overall office supply reducing. Furthermore, the scarcity of good quality stock remains as Grade A vacancy rate ended 2017 at 3.6%. Overall vacancy was largely unchanged in Q4 but eased down on an annual basis from 6.8% to 6%. However, the development pipeline is steady for 2018, and with just two schemes due to complete early in the year, this will help to ease the immediate pressure on good quality supply.
Richard Thornton, director of office agency at JLL, continued: “Diminishing levels of office stock and a healthy level of active requirements means there is optimism for 2018. The Leeds office market will ultimately soon benefit from more speculative development. Whilst tight supply can be viewed as a positive, in that it reflects strong occupier demand, we do not want a lack of speculative office development persisting as it could hinder the pace of economic growth and inward investment.”
JLL also points to Local Authorities, who have emerged as a key driver of speculative development in a number of regional cities including Leeds, where their investment and support is particularly welcome and not always entirely dependent on a scheme’s financial viability. Getting involved, Local Authorities can help drive regeneration, create employment, stimulate further investment and produce downstream revenues from business rates.
