The UK’s regional office markets saw continued demand in the first half of 2017, with office take-up reaching 2.8 million square feet, only slightly lower than the five year average, the latest figures show.
For the first half of 2017, several cities witnessed improved levels of take-up when compared with the first half of 2016. These included Aberdeen, Edinburgh, Leeds and Manchester, according to the property perspective report from real estate provider CBRE which monitors the performance of 10 regional cities.
Investment interest in the larger regional cities has also remained buoyant with £1.4 billion spent so far this year on offices beyond London and the South Eastern regions, however investments volumes are down when compared to 2016.
In the South East some 1.1 million square feet of office space was acquired for occupation in units of over 10,000 square feet. The creative industries sector accounted for 35% of take-up in the first half of the year and this sector in particular has been driving the co-working revolution and the provision of flexible office space.
Select locations such as Reading, Maidenhead and Watford also saw a continuation of record rents being set in the first half of the year, which has largely been driven by the delivery of new developments.
In Leeds confidence is returning with office take-up for the first six months of the year totaling 237,165 square feet. The report says that there remains a good supply of stock in all size and grades and although headline rents have seen an increase.
Leeds is still the most cost effective location of the top UK cities and the report suggests that this may well encourage more inward investment as Leeds makes its marks as a true alternative to the South East and London.
In Manchester take-up was 15% greater than in the first half of 2016. Larger occupiers are increasingly realising that good quality stock is dwindling, with many now making moves to secure premium space ahead of the competition.
In Scotland, Edinburgh has seen numerous pre-lets sign during the first half of 2017. The result has been the strongest six months of take-up ever recorded by CBRE in Scotland’s capital, a total of 739,860 square feet ahead of the full year 2016 total.
A series of pre-lets and lettings on schemes under construction accounted for around 42% of total take-up. Just as the quarter closed, it was confirmed that the Government Property Unit had signed for 181,307 square feet at Artisan Real Estate’s New Waverley scheme. However even before this deal went through the market was looking strong.
‘The UK economy has continued to show resilience during the first half of 2017, though there are signs that GDP growth may be slowing as rising levels of inflation begin to influence consumer markets,’ said Andrew Marston, national research director at CBRE.
‘With this backdrop it is encouraging to see that regional office markets have seen strength in demand be maintained, with some standout take-up results seen in both Manchester and Edinburgh,’ he pointed out.
‘Dynamic cities with strong underlying market fundamentals such as Birmingham, Bristol and Manchester have also continued to attract strong interest from active investors. We anticipate that fairly priced stock will continue to sell and there will be ongoing interest in markets which trade at a discount in comparison to London and the South East,’ he added.