Take-up in the UK’s regional office markets remains resilient, despite the looming negotiations surrounding the UK’s exit from the European Union.
New research from CBRE shows that demand for office space across the UK totalled 5.6 million sq ft in 2016, a small 7 per cent decrease from the 2015 total of 6 million sq ft and just 3 per cent below the 5 year average.
Take-up activity in the second half of the year, following the EU Referendum result was only 3 per cent lower than the first half of the year.
Bristol is highlighted by CBRE as a stand-out market, with occupier activity up almost 60 per cent year-on-year – boosted by a pre-letting of 107,000 sq ft at 3 Glass Wharf to HMRC – but Manchester, Liverpool and Glasgow are also highlighted as improving hotspots.
Manchester did not beat its 2015 level, but outperformed its five-year average by 16 per cent, with Q4 recording a total of 621,000 sq ft, the highest level of office space take-up since 2010.
In contrast, take-up in cities such as Leeds and Edinburgh has struggled to keep up with the very successful years these cities have seen since 2013, notes CBRE. Birmingham, however, was just slightly below its five-year average, despite being down 28 per cent from 2015.
“Requirements continue to circulate, so it still remains to be seen the extent to which the Brexit vote will dampen down occupier demand in the regions. However many markets will welcome the timing of the Government Property Unit, who have launched a search for a number of hubs in different UK cities, all of which are very large compared to the typical requirements that drive the regional cities,” says Emma Jackson, Associate Director of Research for National Office Markets.
Essex office market sees “phenomenal” levels of investment
11th January 2017
The only way is Essex for office investors this year, after the county saw “phenomenal” levels of investment in 2016.
According to Savills, total sales volumes in the Essex office investment market tripled last year to reach circa £100 million.
The surge was driven by the strength of local office rents, as well as the continued popularity of Permitted Development Rights.
Rents rose to higher than £20 per sq ft (£215 per sq m) last year, pushed up by low levels of stock and a lack of new development. With prices relatively low in comparison to the nearby south east and Central London office markets, investors are taking advantage of the potential to generate strong returns as a result.
Indeed, the local market’s strength provides another UK commercial property alternative to London for investors, echoing the rise of Cardiff as a new office investment hotspot.
Notable deals highlighted by Savills is the sale of First Data’s 117,000 sq ft (10,869 sq m) headquarters on Endeavour Drive in Basildon to Maya Capital for £20 million, the £14 million sale of Regent House to developers Quinata Global and Boultbee Brooks purchase of Stone Cross in Brentwood town centre for £10.05 million.
Mike Storrs, associate director at Savills Chelmsford, comments: “Essex has seen a phenomenal amount of investment over the past year as investors continue to recognise the strength of the local market. The popularity of office to residential conversion through the Government’s decision to extend PDR has contributed to the upward trend in rental levels as there is now generally a lack of good quality space. Essex also remains a cost effective alternative to London and the County benefits from good road and rail links, particularly with Crossrail extending to Shenfield in 2018.”
“These conditions are unlikely to change as we head into 2017,” he adds.
Cardiff office take-up climbs to 15-year high
5th January 2017
Take-up of office space in Cardiff has climbed to a 15-year high, as the city becomes a Technology, Media and Telecommunications hub.
According to Savills, take-up for the year is on course to total around 670,000 sq. ft. (62,245 sq. m.), surpassing the 615,000 transacted in 2015 and 34 per cent higher than the 10-year average of 500,000 sq. ft..
The surge in take-up was fuelled by the city’s growing reputation as a TMT hub, with an above-average of large deals and pre-lets driving activity and volumes. Professional and legal services led the occupier mix, accounting for deals such as Hugh James 100,000 sq ft (9,290 sq m) pre-letting at 2 Central Square and HMRC taking 54,000 sq ft (5,016 sq m) at Brunel House.
Gary Carver, director in the business space team at Savills Cardiff, says that take-up was “exceptional” in 2016.
Demand for Grade A space also pushed rents up in 2016, with average headline rents rising by 14 per cent over the year from £22 to £25 per sq. ft., according to Savills.
“The city benefitted from many high profile deals throughout the year and the emergence of the city as a TMT hub. Looking ahead to 2017, One Canal Parade and 3 Capital Quarter are due to complete in 2017, reducing the demand pressure on Grade A space. The proposed 270,000 sq. ft. pre-let to HMRC in Central Square and two deals over 30,000 sq. ft., which are expected to complete in January, will ensure take up levels in 2017 remain at the same high levels we saw in 2016.”
Indeed, it is anticipated that Grade A rents will remain at £25 per sq ft in 2017.
Ross Griffin, director in the investment team at Savills Cardiff, comments: “The Cardiff investment market had a robust year in 2016 with the city being of interest to a broad cross sector of investors.”
Savills predicts investment into Cardiff offices will finally reach around £150 million for 2016, against £136 million in 2015, with overseas buyers taking particular interest in larger lot sizes such as 1 Capital Quarter, acquired by Golden Gate Capital, and the BT Data Centre, acquired by Keppell.
Despite a slower second half of the year, property companies and private investors remained active, but were careful in stock selection.The sale of The Levels on Capital Business Park, Cardiff, is an example of this; the high quality multi-let industrial estate provided both asset management opportunities as well as an attractive running yield for its foreign buyer.Google+