After a relatively strong start to the year, the Leeds office market saw a marked reduction in leasing volumes during Q2 2016, falling to 149,129 sq ft – 44% below the previous quarter and 28% below the five-year quarterly average.
In the city centre, take-up reached just 73,103 sq ft – its lowest quarterly total for four years. This was due in part to a number of larger deals being delayed in the lead-up to the EU Referendum, with 96% of transactions for less than 10,000 sq ft.
In contrast, the out-of-town market continued to perform well, transacting more than the city centre for the first time in five years to reach 76,026 sq ft. However, unlike the city centre, the demand profile within the out-of-town market is characterised by a large number of ‘churn’ deals.
The professional services sector was the most active during Q2, accounting for 37% of the deals transacted, followed closely by the technology, media and telecommunications (TMT) sector at 30%. As an emerging industry, the TMT sector has seen steady growth across Leeds in recent months. Albeit, occupiers in this sector tend to favour a more agile workplace, which is reflected in the location, size and type of space leased.
Despite the general slowdown in Q2, occupier sentiment across Leeds remains relatively buoyant following the vote to leave the EU and the fundamentals of the office market remain strong. As such, we are hopeful that H2 will see a return to more ‘healthier’ levels of take-up.