Market snapshot

Office Market Pulse Leeds Q2 2017

Office occupier take-up across Leeds rebounded during the second quarter of 2017, with in excess of 226,000 sq ft of space transacted; up 41% on the first quarter on 2017 and more than 50% on the same period in 2016.

While the balance of activity has evened out somewhat, the out-of-town market remained the most dominant for the fourth consecutive quarter, accounting for 60% of total take-up - albeit with significantly fewer deals than the city centre.

The supply of grade A space continues to diminish as a result of this increased take-up, which is placing upward pressure on rental levels. As such, new prime headline rents have been set across both the city centre and out-of-town markets, with £30.00 per sq ft achieved at 6 Queen Street and £22.00 per sq ft achieved at Kirkstall Forge.

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In this issue:

Strongest take-up for 18 months

Office occupier take-up across Leeds rebounded during the second quarter of 2017, with in excess of 226,000 sq ft of space transacted; up 41% on the first quarter of 2017 and more than 50% on the same period in 2016. It is important to note however, that occupier demand in 2016 was somewhat muted by the EU Referendum.

While the balance of activity has evened out somewhat, the out-of-town market remained the most dominant for the fourth consecutive quarter, accounting for 60% of total take-up - albeit with significantly fewer deals than the city centre.

In total, 58 transactions were completed between April and June, a 41% increase on previous quarter. Despite this uptick, the average transaction size remained largely the same at 3,900 sq ft, reinforcing the dominance of ‘churn’ deals within the Leeds office markets.

The professional services sector once again accounted for the lion’s share of activity but it was the banking, finance and insurance sector that boosted the overall take-up figure, accounting for three of the five largest transactions.


Key occupational transactions, Q2 2017


Property 

Size (sq ft) 

Landlord(s)/vendor

Tenant/purchaser

2nd - 5th  Floors, 6 Queen Street
46,058
Rockspring 
Burberry 
Mayfield Business Park, Ilkley
18,179
Oakapple 
Smartcredit
2nd Floor, City West
12,582
XLB Property & Harbert Management Corporation
Cunningham Lindsey 

Source: Lambert Smith Hampton

Supply continues to fall

No new buildings completed during Q2 and the immediate availability of grade A space continues to diminish as a result. In addition, much of the obsolete grade C space has been removed from the market for conversion to higher value alternative uses. While reducing ‘choice’ for office occupiers, this shows confidence within the city’s development markets and the continued appetite for converting offices through Permitted Development Rights.

Q3 will see both Platform and 3 Wellington Place complete, bringing 232,627 sq ft of brand new grade A accommodation to the city centre market, along with the space at Kirkstall Forge bringing 109,088 sq ft of grade A accommodation to the out-of-town market, which we anticipate will stimulate greater occupier demand during the second half of 2017.

New headline rents set across city centre and out-of-town

The continued demand for grade A space, together with a rapidly diminishing supply is placing upward pressure on rental levels.

The letting at 6 Queen Street to Burberry for its North Shoring relocation from London has set a new headline rent of £30.00 per sq ft, breaking the previous peak and demonstrating the rental growth potential of new build grade A space within prime locations.  While we anticipate further rental growth (albeit marginal) throughout the second half of the year, Leeds still represents good value for money compared with other Northern Powerhouse cities, with headline rents currently at an 11% discount to those in Manchester.

In addition the out-of-town market also witnessed strong rental growth during Q2, with £22.00 per sq ft being achieved at Kirkstall Forge.

Lack of stock hampers investment volumes

After a positive start to 2017, office investment volumes across Leeds were subdued in Q2, with no prime assets being traded.

It is worth noting however, that the fall in activity is not due to a lack of investor appetite but more the notable lack of stock on the market. As such, there will be strong competition for anything that does come forward in the second half of the year.

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Adam Varley | Director - Office Agency | Leeds
Adam Varley

0113 887 6706

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Adam Varley
Director - Office Advisory

0113 887 6706

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