Market snapshot

Office Market Pulse Leeds Q4 2013

Improving business confidence resulted in a surge in occupational demand in the Leeds city centre and out of town office markets during 2013, with a total of 1,285,125 sq ft of office space transacted throughout the year - the highest annual take-up figure in 15 years. Grade A supply remains severely restricted and is likely to lead to an increase in prime headline rents as competition for the remaining space increases.

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In this issue:

Office take-up in Leeds reaches 15-year high

Leeds’ city centre office market witnessed a remarkable end to 2013, with the Q4 leasing volume up 211% on the corresponding period in 2012, to 254,798 sq ft (Q4 2012: 81,806 sq ft). Over 40% of the deals transacted were for grade A space, with Leeds City Council’s pre-let at Merrion House comprising the lion’s share, closely followed by KPMG’s letting at Broadgate. 

Sentiment in the out-of-town office market was equally as encouraging, with take-up reaching 200,987 sq ft in Q4 2013 – a 202% increase compared with the same quarter in 2012 (Q4 2012: 66,370 sq ft).

These combined figures brought the final year total for 2013 to 1,285,125 sq ft (city centre: 794,043 sq ft, out of town: 491,082 sq ft) – 73% higher than 2012 and Leeds’ largest take-up for 15 years.

Despite a significant number of larger transactions (20,000 sq ft plus) taking place during Q4, the majority of occupiers continued to seek space of sub-5,000 sq ft, with over 63% of the deals recorded in this size bracket.

For a detailed breakdown of Q4 2013 take-up by grade, please click here or on Chart 1 to the left of this article.

Significant Leeds office lettings Q4 2013

Property 

Size (sq ft)

Landlord / Vendor  Tenant / Purchaser 
Leeds Valley Park 

81,911

Goodman     Lowell Group
White Rose Office Park (pre-let) 

60,000

Munroe K HSBC
Merrion House, The Merrion Centre (pre-let) 

50,000

Town Centre Securities  Leeds City Council
Broad Gate, The Headrow 

28,271 

Highcross KPMG KPMG
Wellington Plaza, Wellington Street 

20,885 

Legal & General  Wage Day Advance

Source: Lambert Smith Hampton

Nine months supply of office space remaining

Grade A office availability in Leeds city centre fell to its lowest ever level in Q4 2013 at just under 200,000 sq ft, representing approximately nine months supply. Of this figure, only three buildings are currently capable of accommodating a requirement of over 20,000 sq ft.

This tightening of supply and increase in demand has led to a number of outdated grade B and C properties being refurbished. However, the vast majority of these redevelopments are only capable of providing floor plates of between 4,000 and 6,000 sq ft.  

With the lack of any new space coming to the market in the next 12-18 months, occupiers will be forced to compromise on location or quality of space. As such, there is now a genuine opportunity for owners of key sites to consider speculative development.

For a breakdown of Q4 2013 office supply by grade, please click here or on Chart 2 to the left of this article.

Positive signs for net effective rents

Headline rents for grade A space in Leeds’ city centre and out of town office markets remained stable in Q4 2013, at £26 per sq ft and £16 per sq ft respectively – albeit an increase of 13% and 28% respectively on the corresponding period in 2012.

As competition for the remaining grade A space increases, so too will prime headline rents. Additionally, there are early indications of incentive packages beginning to harden, which will lead to an uplift in net effective rents.

For a breakdown of Q4 2013 office rental values, please click here or on Chart 3 to the left of this article.

How did the national investment market perform in Q4 2013?

The next edition of our quarterly UK Investment Transactions (UKIT) research report will be available for download soon. To register for your copy, contact nbulley@lsh.co.uk.

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Adam Varley

0113 887 6706

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Adam Varley
Director - Office Agency

0113 887 6706

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