Market snapshot

Office Market Pulse Leeds Q4 2014

Following a period of very strong activity, take-up was relatively modest in Q4, with 157,568 sq ft of transactions within the city centre. This is down 61% compared to the same quarter last year, although Q4 2013 was one of the best quarters on record.

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In this issue:

Occupier demand cools as supply is pinched

Following a period of very strong activity, take-up was relatively modest in Q4, with 157,568 sq ft of transactions within the city centre. This is down 61% compared to the same quarter last year, although Q4 2013 was one of the best quarters on record.

Ten deals (40% of all transactions) acquired Grade A office accommodation and only three deals (9%) acquired poorer quality Grade C accommodation. This trend is becoming a key theme in the city centre market.

The SME sector continues to dominate the market with 80% of deals recorded in this sector acquiring space of less than 5,000 sq ft.

2014 total take-up for the city centre was 526,150 sq ft. Whilst take-up was below 2013’s record total of 777,213 sq ft, 2014 finished above the long-term five year average (480,000 sq ft).  A number of significant pre-lets being delayed has hindered 2014’s overall performance, but we anticipate a strong start to 2015 as these deals conclude.

The out of town markets recorded their largest quarter’s take-up for 2014 in Q4, boosted by two deals over 20,000 sq ft giving a final total 118,132 sq ft.  Despite a strong Q4, the market still relies on a large volume of smaller transactions (27 deals recorded) to make up its total with the average transaction size being 4,375 sq ft.

Fortune favours the brave

Q4 started to show the rewards for developers embarking on speculative development, with both Squires Patton Boggs & DAC Beachcroft committing to pre-let space at 6 Wellington Place & St Pauls House.

Building refurbishments are helping to address the imbalance of supply in the city centre for Grade A space. The market will be set for an injection of supply in H1 2015 - 21 Queen Street is scheduled to complete in Q1 2015, while works at 9 Bond Court are progressing steadily. New build stock currently under construction (472,809 sq ft) is not due for completion/occupation until 2016 leaving occupiers wanting new build space with very few options.

The out of town markets follow a similar theme to the city centre. In the absence of any development activity, the availability of Grade A space is rapidly diminishing and is likely to impact on rates of take-up.

Significant Leeds office lettings Q4 2014

Property 

Size (sq ft)

Landlord / Vendor  Tenant / Purchaser 
6 Wellington Place

32,382

MEPC   Squire Patton Boggs
St Pauls House

24,800

Boultbee Brooks DAC Beachcroft
Blokhaus, Horsforth

23,685

Rushbond Search Laboratory
Synergy, Gildersome

20,395 

Clugston TEKLA
Westgate

12,006 

Bruntwood Leeds City Council
 3200 Thorpe Park

 10,651

 Atkins  Leeds South & East NHS Clinical Commissioning Group

Source: Lambert Smith Hampton

Incentives reducing across all grades

City centre and out of town rents have started to show signs of growth with headline rents increasing to £26.00 per sq ft and £16.50 per sq ft respectively in Q4.

Landlords are becoming increasingly able to dictate incentive packages in certain situations (e.g. where supply is limited of Grade A/B space in prime locations, with ‘large’ single floor plates).  Whilst tenants can use their covenant or requirement size to their advantage, this is becoming more scarce as a negotiating tool.

Strong Q4 investment confirms record year for Leeds

The final quarter of 2014 for Leeds office market saw high levels of activity with £74.29m transacted - a significant increase on the Q3 figure of £23.96m.

The Leeds office investment volume for the year totaled £130.3m compared to £76.3m in 2013 which is a 70.7% increase year on year.

The most significant transactions were:

The sale of 6 Queen Street by CDP for £30m to Rockspring Hanover PUT. This is a speculative office development due for completion in spring 2016.

The purchase of Yorkshire House on Greek Street for £17m by FORE Partnership. This property is set to undergo a substantial refurbishment.

No 1 The Embankment which sold to PATRIZIA Immobilien AG for £10.05 million reflecting a net initial yield of 9.92%.

Want more information about this Snapshot?

Adam Varley | Director - Office Agency | Leeds
Adam Varley

0113 887 6706

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Adam Varley
Director - Office Agency

0113 887 6706

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