Tenant demand for office space from professional and financial services occupiers is showing signs of growth across UK regional cities, according to CBRE. Despite the UK’s return to recession in the first half of the year, CBRE’s Regional Offices Marketview reveals that this improvement is due to a diminishing supply of available prime space, as well as a significant number of occupiers facing lease expiration in 2014/2015, and who are now beginning to consider alternative office accommodation as a result.
Across the UK, the report reveals a divergent picture for the regional office markets. Cities such as Aberdeen, Edinburgh and Leeds have all benefitted from robust occupier demand helping to push take-up above the long term average by around 15%. However, other areas have suffered as a result of the ongoing economic instability and exposure to the Eurozone crises with the subsequent resistance of corporate occupiers to commit to new premises. In Bristol take-up in the year to date is tracking at or below average.
In terms of available stock across all Regional markets, secondhand space continues to dominate central city supply, accounting for 80% of total availability. There remains a severe lack of debt funding to support speculative development, and as a result, grade A office stock availability is dwindling across the UK. The development pipeline over the next three years will deliver just 0.4 million sq ft per annum, just 20% of the annual average since 2000 of 1.8 million sq ft. Already over half of this development stock has occupier commitment.
Philip Morton, Senior Director Agency and Development, CBRE Bristol said:
“Although cities throughout the UK are still experiencing the repercussions of widespread European uncertainty, there are certainly some indications that mature regional leasing markets are improving.
“Bristol is well placed in terms of supply and demand for the next 12 – 18 months, when compared to Manchester for example. With regard to rental, Bristol is in the middle of the pack with quoting rents at £27.50 psf per annum for a new, prime Grade A office. There are currently just seven buildings available in Bristol of which three could offer 45,000 sq ft.”
Philip added:
“A number of medium sized enquiries are currently live and in the throes of negotiation. I believe it will not take long before the dynamics of the Grade A new office market swings in favour of the landlord.”
