Market snapshot

Office Market Pulse Sheffield Q2 2015

Sheffield’s office market has had its most encouraging quarter to date, with combined take-up for the city centre and out of town markets reaching 170,980 sq ft in Q2.

It is hoped that the increase in overall take-up will breed confidence for further speculative development, in addition to 3 St Paul’s Place, which will bring 80,000 sq ft of Grade A space to the market by the end of the year – a critical component if the city is to meet future occupier demand.

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In this issue:

Sheffield's H1 2015 office take-up on par with 2014 total

Sheffield’s office market has had its most encouraging quarter to date, with combined take-up for the city centre and out of town markets reaching 170,980 sq ft in Q2.

At 286,657 sq ft, total take-up for the first half of this year has almost surpassed 2014’s full year total of 289,176 sq ft; a clear indication that market conditions are significantly improving.

The largest deal of the quarter was Lambert Smith Hampton’s acquisition of the Old Post Office in Fitzalan Square for Sheffield Hallam University. Even excluding this one deal, which distorts the figures slightly, almost 150,000 sq ft of space was occupied; 34% ahead of the same period last year.

Despite the number of transactions more than doubling in comparison to Q1 2015 - from 13 to 28 - the average deal size remained low at 5,741 sq ft, with almost three quarters of the transactions falling below 5,000 sq ft; an indication of the high level of churn within the SME sector.

Grade A take-up dwindles as availability continues to diminish

Total office supply across Sheffield’s city centre and out of town markets stood at approximately 700,000 sq ft at the end of Q2 2015, with Grade A availability accounting for less than half of this figure.

This has had a direct impact on the level of Grade A take-up, which accounted for just 16% of the total Q2 2015 activity compared with 70% during the same period in 2014.

It is hoped that the increase in overall take-up will breed confidence for further speculative development, in addition to 3 St Paul’s Place, which will bring 80,000 sq ft of Grade A space to the market by the end of the year – a critical component if the city is to meet future occupier demand.

Key occupational transactions, Q2 2015


Property 

Size (sq ft) 

Landlord(s)/ vendor

Tenant

Old Post Office, Fitzalan Square
50,218
Capital Fitzalan
Sheffield Hallam University
Cemex House, Savile Street
17,928
Cemex IC Innovations
One North Bank
14,000
Commercial Estates Group
XLN
Derwent House
7,450
Private landlord Withers & Rogers

Source: Lambert Smith Hampton 

Significant increase in Grade B rents

Prime office rents in Sheffield city centre have remained consistent at £22 per sq ft, although this figure is expected to rise to £23 per sq ft by Q1 2016 and is linked to the completion of 3 St Paul’s Place.

More notably however, the lack of available good quality stock has led to an increase in Grade B office rents for the first time since 2008.

Headline rents for Grade B office space in Sheffield city centre are now in the region of £13.50 per sq ft as an element of competition has returned to the market for better quality second hand accommodation.

Investor appetite returns to Sheffield

Following a period of limited investment activity, Sheffield witnessed its first office transaction since Q1 2014 in the sale of 3 Carbrook Triangle for £0.51m to a private investor, reflecting a net initial yield of 6.9%.

While this deal demonstrates a clear appetite among investors for product in Sheffield city centre, the shortage of prime office stock is likely to limit any activity in the immediate future.

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

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Tom Shelton

0114 270 2705

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Tom Shelton
Associate Director - Agency

0114 270 2705

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