Market snapshot

Office Market Pulse Leeds Q2 2015

The combined Leeds city centre and out of town office markets recorded a total take-up of 250,823 sq ft in the second quarter of 2015 compared with 149,747 sq ft in the same period last year – an increase of 67%.

While cranes across the city’s skyline would suggest an apparent easing of the pinch on Grade A space, two thirds of the 540,000 sq ft due to complete in 2016 is already committed.

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In this issue:

Q2 2015 office take-up two thirds higher than 2014

The combined Leeds city centre and out of town office markets recorded a total take-up of 250,823 sq ft in the second quarter of 2015 compared with 149,747 sq ft in the same period last year – an increase of 67%.  At the half year point, the combined take-up for both markets stood at 398,052 sq ft compared with 325,789 sq ft at H1 2014.

Despite there being a 28% rise in the number of deals compared to the previous year - from 43 in Q2 2014 to 55 in Q2 2015 - the average deal size remained low at 3,858 sq ft.

At 213,126 sq ft, the city centre witnessed its strongest quarterly take-up since Q4 2013. However, this was largely underpinned by two significant pre-lets; 49,650 sq ft to PwC at Central Square and 51,531 sq ft to Addleshaw Goddard 3 Sovereign Square. 

Activity in Leeds' out of town office market remained on par with last year, with the Q2 2015 take-up figure totalling 37,697, compared with 36,925 sq ft in the same period in 2014. However, interestingly, none of the deals were for Grade A space.

Looking ahead, with several requirements from major occupiers - including BSkyB - due to be satisfied during H2 2015, we expect the final year combined take-up figure to exceed the 800,000 sq ft transacted in 2014.

New developments unlikely to ease pinch on Grade A space

Grade A office supply in Leeds city centre has fallen by 48% - from 301,644 sq ft in Q2 2014 to 167,373 sq ft in Q2 2015 - and accounts for just 13% of the total available space.

While cranes across the city’s skyline would suggest an apparent easing of the pinch on Grade A space, two thirds of the 540,000 sq ft due to complete in 2016 is already committed. Occupiers will therefore be looking for landlords to move forward with planned refurbishments in order to satisfy any immediate future demand.

Key occupational transactions, Q2 2015


Property 

Size (sq ft) 

Landlord(s)/ vendor

Tenant

3 Sovereign Square 51,531 Bruntwood & KIer Addleshaw Goddard
Central Square 49,650 Roydhouse Properties / M&G PwC
6 Wellington Place 19,784 MEPC Equifax
9 Bond Court 5,770 L&G Lambert Smith Hampton

Source: Lambert Smith Hampton 

Prime rents remain good value, despite marginal increase

As predicted, prime office rental levels have moved on marginally to £26.50 per sq ft which, when compared with £24 per sq ft for good quality refurbishments, is still perceived as good value especially compared with the UK big 6 regional markets

With increasing optimism within the office markets, lack of supply and current occupier demand we predict rents for H2 2015 to peak and set a new headline for the city centre at £28.00 per sq ft

Out of town rents have remained stagnated however, as with the city centre, we anticipate that rents for prime buildings will show some marginal growth during 2015 and predict these will rise to £17.50 per sq ft.

Investment activity slows during Q2

Despite getting off to a strong start, office investment activity across Leeds slowed during the second quarter, with just Wilton Developments and Clugston Estates’ sale of 15/16 Park Row to F&C UK Property Fund for £9.3m, reflecting a net initial yield of 5.48%

This brings the total value of office investments transacted during the first half of 2015 to £75.22m – more than double the H1 2014 figure of £31.4m.

The second half of the year promises to be stronger with more general market activity and a greater flow of deals. Whilst competition for good stock remains fierce, relatively high prices should see more sellers in the coming months.

View the latest edition of our UK Investment Transactions (UKIT) report.

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Adam Varley

0113 887 6706

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Adam Varley
Director - Office Agency

0113 887 6706

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