Market snapshot

Office Market Pulse Leeds Q3 2017

Q3 was a phenomenal quarter for office occupier take-up across Leeds, bolstered by the Government Property Unit’s decision to take 378,000 sq ft at Wellington Place for its Leeds Hub – the city’s largest ever single pre-let. It is anticipated that annual take-up figures for the city centre will reach 1m sq ft by the end of 2017 for the first time since records began.

A new headline rent of £30.00 per sq ft was achieved following the letting to Burberry at 6 Queen Street, which is expected to be supported by a number of forthcoming deals, rather than it being perceived as an anomaly.

Despite the continued lack of stock, the volume of office investment transactions across Leeds rose to £42m in Q3 2017 - up 6% on the five-year quarterly average, albeit down some 46% on the same period in 2016. 

In this issue:

Leeds witnesses largest office letting outside of London

Q3 was a phenomenal quarter for office occupier take-up across Leeds, with 677,544 sq ft of space transacted in the city centre and out-of-town markets combined – some 254% more than the same period in 2016.

Bolstered by the Government Property Unit’s 378,000 sq ft pre-let at MEPC’s Wellington Place – the city’s largest ever single pre-let and the biggest office letting to complete outside London so far this year - it is anticipated that annual take-up figures for the city centre alone will reach 1m sq ft by the end of 2017 for the first time since records began.

Activity in the out-of-town market also intensified in the three months to September 2017, reaching 119,554 sq ft – an increase of 81% from the same period in 2016.

While the combined take-up volumes across the city centre and out-of-town markets were clearly driven by the public sector, the TMT sector was the most active during Q3, accounting for almost a quarter of all deals transacted.

Key occupational transactions, Q3 2017


Property 

Size (sq ft) 

Landlord(s)/vendor

Tenant/purchaser

7 & 8 Wellington Place
378,000
MEPC 
GPU / HMRC
10-12 East Parade
30,527
Omaha Nominees (A) & (B) Limited
Confidential 
4th Floor, Central Square
25,740
M&G Real Estate and Marrico
Sky Subscription Services

Source: Lambert Smith Hampton

Welcome injection of grade A supply

Grade A office supply across Leeds has been boosted by the completion of a number of buildings in Q3, including Bruntwood’s Platform within the city centre together with CEG’s No.1 Kirkstall Forge and Scarborough Development’s Paradigm in the out-of-town markets, releasing an additional 126,000 sq ft of space into the market.

While on face value this may seem a welcome boost - given the backdrop of rapidly diminishing availability of grade A space and the strong levels of demand - the market could be facing a potential undersupply situation by 2019.

As such, we believe that the next development start has the potential to ‘steal a march’ by appealing to a captive audience of occupiers with little or no alternatives from which to choose.

Burberry’s letting at 6 Queen Street sets new headline rent

A new headline rent of £30.00 per sq ft was achieved following the letting to Burberry at 6 Queen Street, which is expected to be supported by a number of forthcoming deals, rather than it being perceived as an anomaly.

Rents for prime repositioned building refurbishments are also performing strongly and the gap between new build grade A space in the city centre is relatively marginal.

Out-of-town rents have also increased by 18.2% from 2016 to £22.00 per sq ft, as new build space has been released into the market.

The situation is slightly different for grade B/C space which, in most locations, have shown limited growth and continue to remain ‘discounted’ in an attempt to attract cost sensitive occupiers.

Office investment volumes up on five year quarterly average

Boosted by Sterling Capitol’s sale of Capitol Park for £18m, the volume of office investment transactions across Leeds rose to £42m in Q3 2017 - up 6% on the five-year quarterly average, albeit down some 46% on the same period in 2016. 

The barrier to further deals taking place in the final quarter of 2017 is likely to be due to a lack of stock rather than any dampening of demand.

Key investment transactions, Q3 2017


Property 

Value (£m) 

Yield (%) 

Purchaser

Vendor

Capitol Park 
18.00
8.9
Squarestone PIM 
Sterling Capitol 
1 East Parade
13.00
6.75
Regional Office PUT
BMO Real Estate Partners 
33 Park Place
10.00
Undisclosed
Property Alliance Group
Aviva Investors

Source: Lambert Smith Hampton

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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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