The UK regional office market has seen rental growth across Grade A space in the last 12 months, with lack of supply of prime stock in some UK regional cities resulting in greater increases in Grade B rents, across a number of regions – that’s according to Colliers International’s National Offices Rents Map for 2019.
The UK regional office market (excluding London and Rep of Ireland) has seen average year on year rental increases of 5 per cent for both Grade A and Grade B office space between 2018 and 2019. Lack of supply of prime office space in many regional cities has seen increases in Grade B rents ranging from 3 per cent in the North East to 20 percent in Scotland.
Mark Taylor, Head of National Offices, Colliers International, said: “In Central London we’ve witnessed steady rental growth between 2018 and 2019 but it’s the regional markets where we’re seeing the most interesting picture. The lack of available Grade A office space in many regional markets is having a knock-on effect on the secondary market, with certain regions seeing double digit year on year growth in Grade B rents as a result – as high as 19 per cent in Scotland, for example.
Regions seeing Grade B rental growth above that of prime include:
|Region||Grade A (regional ave.)||Grade B (regional ave.)|
Colliers’ report also shows a number of regional cities moving further into the £30+ per sq ft region, with Bristol (£35 per sq ft), Manchester (£37.50 per sq ft), Edinburgh (£35 per sq ft), and Glasgow (£32.50 per sq ft) all seeing increases in prime rents of between 5 and 8 per cent year on year.
Taylor continues: “Major regional cities such as Manchester and Edinburgh continue to see prime headline rent increase year on year, bringing them comfortably and sustainably in to the ‘thirty’s club’. The perhaps untold story however, is if you consider net effective rents – i.e. the total amount of rent that a tenant will pay over the entire length of their lease, taking into account incentives etc – we are seeing a number of regional schemes breaking the £30 per sq ft ceiling for prime rents.”
“The dynamics of the regional office market are particularly interesting and refreshing at present. Headline rents are long overdue an affordable rise in major regional cities, the cost to the occupier being offset by much more efficient plant and machinery. However, service charge is the big taboo subject – how do traditional landlords compete alongside the booming ‘flex office’ market, or ride alongside the explosive growth of parties offering ‘a different way to occupy office space’?
“To compete, landlords are having to layer in true service provision, more akin to hotels – offering space as a service. Do that correctly and traditional and serviced can sit alongside each other in harmony – and as a result, we might start to see the references to loss of office stock to residential being re-categorised as having been replaced by serviced space.”