Britain’s regional office markets witnessed a surge in occupier demand during the second quarter of 2015 with signings on more than two-million square feet of floorspace – a rise of 51 per cent on the previous three months and 49 per cent above the five-year average.
Pre-letting activity also increased between April and June, impacting on new and Grade A availability which, claims Knight Frank’s Regional Office Market Report, is down by 17 per cent year-on-year collectively to 2.2m sq ft.
The global property consultancy says Birmingham was the clear stand-out performer for 2015’s second quarter, with take-up of 521,136 sq ft. This was boosted by a number of large transactions, the biggest being the 212,000 sq ft pre-let to HSBC at Arena Central.
In the investment market, £2.09bn regional office assets changed hands during the first half of the year, the market’s strongest six months since the latter half of 2007. Bristol, Manchester and Birmingham were the main focus of second quarter investment activity, accounting for over half of total investment turnover.
According to Knight Frank, Bristol, in particular, saw some sizeable transactions, including the off-market purchase of Templeback — the city centre office building adjoining the floating harbour — by Orchard Street Investment Management in June for £58.5m. Another notable deal was Aviva Investors’ acquisition of five-storey 66 Queen Square office block for £32.7m.
“Improved occupier confidence has led to a surge in pre-letting activity and high levels of take-up across the main regional office markets in the second quarter,” commented Knight Frank’s head of regional offices, Stephen Hodgson.
“This, we anticipate, will be reflected in rental growth and further starts on new development schemes over the next 18 months.
“On the investment front, despite the fact that yields are approaching historic lows we also feel that there is scope for further yield compression,” he added.
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