Market snapshot

Office Market Pulse Sheffield Q3 2014

After a strong Q2 there has been a decrease in take up for grade A city centre space in Sheffield in Q3. However, enquiry levels are increasing for larger office requirements.

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In this issue:

Enquiry levels pick up for larger requirements in city centre

After a strong Q2 there was a decrease in the take up for grade A city centre space with 19,800 sq ft transacted in Q3. This is mainly due to the fact that Westfield Health took 40,000 sq ft at Milton House in Q2, slightly distorting the figures. Whilst take up of grade B stock increased by approximately 9,000sq ft, it doesn’t represent a notable differential from the previous quarter.

Enquiry levels are slowly increasing with a significant rise in the number of larger requirements over 10,000 sq ft in comparison to the majority of requirements in the first two quarters of the year being in the 5,000 – 10,000 sq ft bracket.

Demand in the out of town freehold market remains strong, particularly in the owner occupier market where occupiers are looking to purchase their own office building with ample car parking provision.

Supply of grade A city centre space remains low

Supply of grade A office stock in the city centre stands at 127,900 sq ft in Q3, down by 19,300 sq ft from the previous quarter. The construction of St Paul’s remains the only major pipeline development in Sheffield due to take place in early 2015 which will add 73,639 sq ft of quality office stock to the supply chain.

Milton House, however, is due to be refurbished to grade A specification and will provide approximately 50,000 sq ft of office accommodation with completion due in early 2016.

Key occupational transactions Q3 2014

Property 

Size (sq ft) 

Landlord(s)/ vendor

Tenant

The Straddle 20,705 The Canal and River Trust Servelec
Unit 1, Europa Link, Sheffield Business Park 6,500 Sheffield Business Park Ltd. Core Assets
Northbank House 11,000 Commercial Estates Group Exel Telecom
Source: Lambert Smith Hampton

Rents static from Q2 but incentives become less available

Grade A office rents in the city centre have remained the same since Q2 at £21 per sq ft but we are seeing a slight reduction in rent free periods across the board.

The letting to PWC at St Paul’s Place at £21 per sq ft perhaps gives a false indication of grade A office rents in the city. It will be the most prestigious office building in Sheffield in terms of specification and location and there are few comparable transactions. Standard rents for grade A space tends to be between £15 - £17 per sq ft.

Some fringe city centre office locations are now seeing movement due to the limited choice of good quality space. Wards Exchange and Northbank House are two examples with 5,500 sq ft and 11,000 sq ft respectively being let this quarter.

Rents for grade B space remain similar at £7 - £9 per sq ft given that demand has stayed relatively constant whilst there is a large amount of supply of second tier office space in Sheffield.    
  

Low levels of investment activity due to lack of stock

There were no major office investment deals in Sheffield in Q3 2014 due to a lack of stock being brought to the market.

As investor appetite strengthens we expect to see more activity in the next quarter.

 

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Tom Burlaga

0114 270 2706

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Tom Burlaga
Senior Surveyor - Agency

0114 270 2706

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