Latest figures from Cushman & Wakefield show office take-up in key regional cities reached 1,313,302 sq ft in Q2 2017. This is close to the quarterly 10-year average and prospects for the second half of the year are looking more promising.
Cushman & Wakefield has collated data on office take-up in Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Manchester and Newcastle city centre markets.
Key deals in Manchester and Edinburgh including the Government Property Unit’s (GPU) 189,000 sq ft pre-let in Edinburgh, where Q2 take-up reached a record breaking 423,000 sq ft, and WeWork taking 55,800 sq ft at No. 1 Spinningfields, helped to boost take-up figures and maintain average performance.
In central Manchester, Q2 take-up was 284,497 sq ft taking H1 total take-up to 492,730 sq ft, a 17% increase on the first half of 2016.
Rob Yates, Partner and Head of Office agency at Cushman & Wakefield in Manchester commented: “Manchester is continuing to see strong levels of demand across the city centre from both existing occupiers and inward investors. The letting to WeWork at 1 Spinningfields, their first operation in the UK outside of London, and to Distrelec at 2, St Peters Square, which is their first operation in the UK, are a significant statement for the Manchester market.
He added: “Looking ahead, there are a number of potential larger transactions in the pipeline which suggest total take-up for 2017 will exceed 1m sq ft for the fourth consecutive year.”
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In Leeds city centre, 134,796 sq ft of office space was transacted, a 28% increase on the first quarter. Of the 39 city centre transactions completed in the quarter, the largest was the acquisition of 46,058 sq ft of space at 6 Queen Street by Burberry, which is the biggest city centre deal to complete for over two years. The Baird Group’s freehold acquisition of Riverside House, comprising 10,681 sq ft, was the only other city centre transaction above 10,000 sq ft.
Bruce Edmondson from Cushman & Wakefield’s Leeds office agency team said: “Despite uncertain times over the past six months, the Leeds office market has treaded water well with a number of deals coming to fruition which have kept the uptake figures at a resilient level.
“With schemes in the city centre such as MEPCs Wellington Place proving to attract quality occupiers including Willis Towers Watson which recently took 25,986 sq ft within Number 5 Wellington Place and the belief they have in their product being demonstrated by the speculative development of Number 3 bringing a further 115,000 sq ft of Grade A office space to the market.”
He added: “Acting on behalf of quality occupiers and witnessing north shoring first hand with an International Fashion House listed on the London Stock Exchange cements the confidence blue chip tenants have in the strength of Leeds as a city and the quality of the office buildings available and we are expecting to see more of this within the coming months.”
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In Newcastle city centre take-up reached 41,101 sq ft, which was up on Q1. The two largest deals of the quarter were Eldon Insurance’s acquisition of 21,261 sq ft at St James Gate and Northern Gas & Power taking 9,426 sq ft of additional space at Baltic Place.
In the out of town market the Q2 figure of 88,190 sq ft was down from the 177,041 sq ft achieved in Q1. The average transaction size was also down from 4,500 sq ft to 4,000 sq ft.
Greg Davison, Partner and Head of Office agency at Cushman & Wakefield in Newcastle, commented: “Whilst the take-up figures might look disappointing by comparison to previous quarters, the underlying mood is more upbeat, with several transactions not quite making the Q2 figures and a number of good requirements in the market; we anticipate Q3 may be more reflective of our market.
He added: “Like a lot of regional cities availability is tightening, but in particular Newcastle does not currently have any new Grade A development coming out of the ground. This is putting increasing pressure on occupiers who are looking to move, as the number of options available to them contracts. The first scheme to come forward will be the first of two new buildings at Science Central, delivering 110,000 sq ft of much needed Grade A stock when it completes in Q1 2019.
“In the interim, there are several high quality refurbishment schemes taking place, including Central Square South and Stockbridge House that will deliver around 60,000 sq ft before the end of the year.”
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Scott Rutherford, Partner and National Head of Offices at Cushman & Wakefield said: “Political uncertainty has dampened occupier confidence in some cities and this has been reflected in a slowdown in enquiry levels in Q1 and Q2 2017.
“We have seen a new resurgence of larger scale enquiries from both the professional and business service sectors and also the finance sector which is a significant improvement on what we have experienced in the last four quarters. This, combined with the upcoming GPU activity in Birmingham and Leeds following the deal in Edinburgh, will have a significant impact as supply is tight across all of the regional office markets without exception.
He added: “In addition to increased take-up, we are seeing rental growth across a number of regional cities with occupiers increasingly looking to those offering flexible and high skilled labour markets.”