Take up of office space outside London is at its highest level for five years. The latest figures show that 1.6 million sq ft was let in the first six months of 2013 as renewed confidence encouraged businesses to seek larger premises. This has attracted investors hoping to snap up undervalued commercial property ahead of further rises in demand.
Only last week asset manager Toscafund announced that it is planning to invest heavily in key regional centres including Manchester, Liverpool and Leeds, saying the markets in these cities have “all the foundations to grow solidly in the coming years.”
During the recession commercial property prices outside London collapsed and have not recovered since. Today the signs of renewed activity suggest that values will soon begin rising again but the problem the regions are then likely to face is that there has been little or no development during the downturn. This is predicted to lead to a scarcity of office space as the economic recovery gathers pace.
“Vacancy rates are trending downwards due to lack of development, and there is a real shortage of space in some cities,” Darren Yates of Knight Frank told the FT.
Manchester is reported to be the only city with over 200,000 sq ft of speculative office space under construction, while in Leeds developments put on hold since 2008 are finally getting off the ground in anticipation of increased demand.
On the other hand Birmingham has a 16 per cent vacancy rate, the highest of all the key regional cities, and there is little construction currently underway. It also has an overabundance of ageing, poor quality stock. However this obscures a recent marked rise in take-up and a fall in landlords offering incentives to tenants.
In Bristol work has begun on a speculative development in Queen Square which will provide 60,000 sq ft of Grade A office space. Apart from this there is little construction in the pipeline.
In Cardiff the Capital Square regeneration project will eventually deliver up to one million sq ft of office and leisure space, but plans have yet to be submitted for the first stage of the scheme.
North of the border, Glasgow will be among the first cities to add to its office supply. It is also tipped to be one of the most attractive locations for investors looking beyond the London market.
According to Mr Yates it is unusual to see developments over 150,000 to 200,000 sq ft at present. Even if every city completed just one development of this size, it would still be insufficient to address the shortage, he added.
Previous Post
Never Leave Your Desk Again with Cutlery Pen Toppers
