Market snapshot

Office Market Pulse Sheffield Q3 2016

Office occupier activity across Sheffield remained subdued during Q3 2016, with post-Brexit uncertainty leading to low levels of enquiries and take-up.  

Grade A supply in the city centre is due to increase sharply in 2017 with the completion of Digital Campus and the £5m refurbishment of Steel City House injecting over 180,000 sq ft much-needed high-quality stock, with larger floor plates into the market. 

Out-of-town, the continued steady take-up and lack of new speculative development has caused a shortage of stock, with the Meadowhall and Don Valley areas in particular proving popular locations. As a result, we are seeing rental increases in good quality grade B stock in out-of-town locations and anticipate this continuing given the lack of speculative development and new stock.

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In this issue:

Owner occupiers take advantage of depressed capital values

Office occupier demand across Sheffield remained subdued during Q3 2016, with post-Brexit uncertainty leading to low levels of enquiries. Take-up for the city centre and out-of-town markets combined amounted to 44,724 sq ft – a 32% increase on the previous quarter but a fall of more than 50% on the same period last year.

While activity in the city centre improved from the previous quarter, at 17,750 sq ft, it was the out-of-town market that accounted for the lion’s share of take-up for the second quarter running, at 26,974 sq ft. This is largely due to the increased popularly of freehold stock among owner occupiers looking to take advantage of depressed capital values.

Looking ahead to Q4 2016, we anticipate a stronger finish to the year with occupiers making up for lost time post-Brexit.


Key occupational transactions, Q3 2016


Property 

Size (sq ft) 

Landlord(s)/ vendor

Tenant/purchaser

Fountain Precinct 
8,750
Kames Capital
Quidco 
Distington House
5,100
Prospect
Amey 
Meadow Court
5,000
Unknown
Consult Search

Source: Lambert Smith Hampton


City centre grade A supply to increase sharply in 2017

Office supply across both Sheffield’s city centre and out-of-town markets remained fairly constant during Q3 2016, with the vast majority of take-up comprising churn deals.

Grade A supply in the city centre is due to increase sharply in 2017 with the completion of Digital Campus and the £5m refurbishment of Steel City House injecting over 180,000 sq ft much-needed high-quality stock, with larger floor plates into the market.

Out-of-town, the continued steady take-up and lack of new speculative development has caused a shortage of stock, with the Meadowhall and Don Valley areas in particular proving popular locations.

Out-of-town market sees grade B rents increase

While grade A rents remain stable, the lack of stock out-of-town has caused a small increase in grade B rents.

Additionally, this has led to the hardening of rent free incentives and a reduction of capital fit out contributions as landlords take advantage of the diminishing stock.

The completion of high quality city centre refurbishments in 2017 will close the gap between grade A and grade B rents.


Appetite for investment remains strong

Total office investment volume across Sheffield rebounded in Q3, with Trinova Real Estate’s acquisition of Vulcan House Steel for £30.95 proving that the yield differential between other cities in the Northern Powerhouse still proves an attractive hunting ground for investors. 

The appetite to acquire in Sheffield remains strong but a very limited stock supply means opportunities are few and far between, restricting the level of transactional activity.

Key investment transactions, Q3 2016


Property 

Value (£m) 

Yield (%) 

Investor

Vendor

Vulcan House Steel, J2 Riverside Exchange
30.95 
6.8 
Trinova Real Estate
Bartuc 

Source: Lambert Smith Hampton 



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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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