Market snapshot

Office Market Pulse Yorkshire Q3 2012

The corporate sector continues to dominate grade A take-up in Leeds and Sheffield as the ‘churn’ of deals reduces across both cities. The lack of available quality grade A city centre stock is likely to be an issue for occupiers in the future.

In this issue:

Occupier take-up rising in Leeds - but Sheffield lagging behind

Take-up across Leeds and Sheffield totalled 183,348 sq ft and 50,992 sq ft respectively in Q3. Compared with 178,943 sq ft and 103,075 sq ft in the same period last year, 2012 figures represent a slight increase of 2% for Leeds and a decrease of 51% for Sheffield.

Sheffield city centre grade A take-up accounted for 8% of the total figure, with grade B and C amounting to 15% of the total. With few local businesses expanding, the majority of current take-up is from national Corporates.

In Leeds city centre, grade A take-up accounted for 37%, and grade B and C accounted for 30% of total take-up. Out of town take-up was dominated by grade B and C quality accommodation with occupiers capitalising on ‘cheap’ deals. The total number of transactions in Leeds and Sheffield was 44 and 13.

For a detailed breakdown of take-up figures, please click here.

Significant occupational transactions in Q3 2012

Property  Size Landlord (s)  Tenant / Purchaser 
No1 Leeds, 4, 5 and part 1st floor 33,867 sq ft IVG Johnston Publishing
No1 Leeds, 6th & 7th Floor 31,155 sq ft IVG Gaz De France Suez
Distington House, Sheffield 12,296 sq ft Prospect GB Skills 4 Justice
Centre Court, Sheffield 10,163 sq ft Prospect GB Firth Rixson
3125 Thorpe Park 8,159 sq ft Scarborough
Partnership Properties
Red Prarie

Continued erosion of city centre supply across Leeds and Sheffield

Total city centre office supply in Leeds and Sheffield stands at 1,5m sq ft and 461,404 sq ft respectively. Leeds has 430,000 sq ft of city centre grade A space available - compared to 179,200 sq ft in Sheffield. Low supply levels are forcing occupiers to consider alternatives such as ring road locations or secondary space.

Due to limited grade A supply in Leeds city centre, there were just three grade A transactions in 2012, compared with 13 in 2011.

In the out of town markets, nothing substantial is currently under construction, which is putting pressure on grade A supply of floor plates of sub 10,000 sq ft.

For a breakdown of supply levels, please click here.

Rental values remain stable

Headline rents for prime grade A space in Leeds city centre remained at £24 per sq ft during Q3, with headline rents for out-of-town stock falling to £16.50 per sq ft. The Leeds out of town markets continue to re-balance following the recession with average take-up now circa 60,000 sq ft per quarter.

In Sheffield, city centre and out of town headline rents remained at a notional £20 per sq ft and £12 per sq ft respectively.

For a breakdown of rental values, please click here.

Office investment activity in Yorkshire remains subdued

Total investment activity in Yorkshire increased by approximately 76% during Q3, of which just 5% was office stock. The majority of the transactions were within the retail sector, with the largest transaction being the sale of the Victoria Quarter in Leeds for £136m. Compared to Q3 2011, total investment activity remained stable.

Investor demand remains focussed on prime assets and in particular city centre assets, which has had an adverse effect on out of town office stock.  Prime office yields in Leeds city centre currently stand at circa 7%. However, we are still experiencing a considerable yield divergence away from the prime end of the market.

Highlights included:

  • Hammerson Plc acquired the Victoria Quarter in Leeds for £136m - reflecting a net initial yield of 5.25
  • Gatehouse Bank Plc acquired 115-126 Briggate in Leeds for £33.4m - reflecting a net initial yield of 6.35%
  • Praxis Holdings acquired Crossgates Shopping Centre in Leeds for £29.5m - reflecting a net initial yield of 8.5%

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Tom Burlaga

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