Regional office market sees steady take up

This week GVA released its latest quarterly report on city centre and out of town office take up in the UK’s nine leading regional city markets. The findings reveal that there has been a reasonable level of take up in the second quarter of 2011, yet concern remains over the longer term.

The ‘Big Nine’ report shows that take up in Bristol, Manchester, Liverpool, Leeds, Edinburgh, Glasgow, Birmingham, Newcastle and Cardiff has totalled 1.59 million sq ft, similar to the three year quarterly average.

A two-tier market is apparent in most cities now. With little development, grade A supply continues to tighten (enabling headline rents to stay firm), while secondary property remains in plentiful supply, thereby weakening average rental growth.

City centre office take-up totalled 1.1 million sq ft in Q2, 9% above the historic quarterly average. Take up was boosted by Admiral’s 215,000 sq ft scheme in Cardiff, and strong take-up in Leeds. Positive signs are the re-emergence of the financial and business service sector in Birmingham, and more enquiries and quality in Bristol as good sized professional firms come back to the market.

In fact, the GVA report estimates that Bristol will be the first to reach the point – this year – where demand for grade A space exceeds supply. Manchester, Edinburgh and Glasgow will follow next year. Although demand will be met by grey space, pre-lets and good secondary property, this suggests which cities may be the first to see a return to development.

Average rental growth forecasts in the regional office markets show a decline of up to 4% in places. However, they are likely to stabilise next year, with growth of about 2.5% from 2013. Take-up in the out-of-town markets was 9% below the quarterly average. There was between 50,000 and 100,000 sq ft of take-up in all cities but Edinburgh and Liverpool saw little activity.

Commenting on the Q2 figures, GVA’s head of office agency in Bristol Ben O’Connor said, “Along with the Admiral deal in Cardiff, there is optimism that take-up figures for 2011 will be boosted by deals that are now looking well progressed – but in the longer term we are concerned that enquiries are thin.”

The ‘Big Nine’ report also focuses on Manchester, where some big occupiers, including professional services and financial names like KPMG and Santander, are looking for sizeable new and additional space. With the remaining 545,000 sq ft of prime space likely to be absorbed in the next 18 months, rents are strengthening. The same will happen to good secondary property as grade A supply dwindles.

You can download a copy of GVA’s ‘Big Nine’ Q2 report at