According to Knight Frank research, whilst it is still undoubtedly tough in the UK regions, the take-up figures for 2012 again show the resilience of the regional office markets.
Annual take-up for 2012 totalled 4,930,430 sq ft, some 4% down on 2011 and 11% down on the ten year annual average. However, a number of markets enjoyed stronger 2012 take-up compared with 2011 including Edinburgh (+47%), Glasgow (+15%), Aberdeen (+14%), Manchester (+10%) and Leeds (+3%). Other cities meanwhile saw reduced activity, such as Sheffield, Cardiff, Newcastle, Liverpool and Birmingham. Take-up in the final quarter was fairly stable at 1.22m sq ft, up 2% on Q3.
Transactions completed in 2012 comprised predominantly secondary space and relatively small lot sizes. The focus on quality continued in most markets and we have seen renewed requirements from professional services firms prompted by forthcoming lease expiries.
While the speculative development pipeline remains limited, Q4 saw another quarterly increase from Q3’s 661,431 sq ft to 734,545 sq ft. Despite the improved speculative activity, general sentiment remains cautious and developers will demand a significant pre-let before any large new-build scheme can progress.
David Porter, Partner, head of Knight Frank’s Manchester office said; “Generally the UK regions have witnessed a steady churn of office take-up, with companies either consolidating operations into a single “HUB” building, or taking less space. In almost all cases, occupiers are looking to upgrade the quality of their space and hence the majority of demand is for new or recently refurbished Grade A accommodation.”
This level of take-up is driving some regional cities towards a “tipping point” where the lack of supply of good quality space is such that a strong case for speculative development or the refurbishment of existing poor quality stock is emerging. Most demand is focused on city centres / CBDs, although, certain out-of-town locations, particularly around major airports, have also seen high levels of take-up compared with previous years.”