Market snapshot

Office Market Pulse Sheffield Q4 2015

Take-up in the Sheffield office market was strong during Q4 2015, resulting in the highest annual take-up since pre-recession. Notwithstanding the University of Sheffield's acquisition of Cathedral Court, the volume of smaller sized deals below 5,000 sq ft, of which there were 14, shows the continuing level of churn, particularly within the public and not-for-profit sectors.   

The supply of good quality accommodation has increased across both the city centre and out-of-town markets as space has returned to the market and refurbished space becomes available. The practical completion of 3 St Paul’s Place at the end of February 2016 will also provide another welcome boost to grade A availability, which currently accounts for 16% of the total available space.

You can download a PDF version of this Sheffield Office Market Pulse, or to read and sign-up to Office Market Pulses from other UK centres.

In this issue:

Highest annual take-up since pre-recession

Total occupier take-up across Sheffield’s city centre and out-of-town office markets reached 469,525 sq ft in 2015; the highest annual take-up since before the recession.

In the final quarter specifically, occupier take-up totalled 89,488 sq ft; a similar level to that recorded in Q4 2014 (83,032 sq ft), with activity evenly split between the city centre and out-of-town markets, at 44,363 sq ft and 45,125 sq ft respectively.

Of the 18 deals transacted, 14 were for space under 5,000 sq ft with an average deal size of 4,972 sq ft, reflecting the continuing churn within the SME sector. Activity was boosted by the University of Sheffield's acquisition of Cathedral Court in the Heart of the City. This was a common theme throughout the year, with both the University of Sheffield and Sheffield Hallam University accounting for 35% of the total annual take-up. 

We expect activity to continue at a similar level to 2015 as confidence returns and good quality stock is filtered through to the market.

Supply increases as refurbishments complete

The supply of good quality accommodation has increased across both the city centre and out-of-town markets, as space is returned to the market but also new, refurbished space becoming available, with prime examples being Steel City House (66,305 sq ft) and Milton House (24,000 sq ft).

Practical completion of 3 St Paul’s Place is due at the end of February 2016, which will bring some much needed grade A space to the market. Arup has taken the top two floors in the building totaling 15,986 sq ft, leaving 60,242 sq ft of space available. 

Work on the next phase of Digital Campus is due to start this year, which will see Acero Works and Vidrio House bring a further 128,375 sq ft of grade A space to the market, although delivery will not be until 2017.

Key occupational transactions, Q4 2015


Property 

Size (sq ft) 

Landlord(s)/ vendor

Tenant/purchaser

Cathedral Court, 1 Vicar Lane
30,000
Aviva Life & Pensions UK
The University of Sheffield
Unit 2, 9-12 Jessops Riverside, Brightside Lane
10,387
LPA Receivers Key Fund
3 Hawke Street Business Park
9,210
Litton Developments Sodexho

Source: Lambert Smith Hampton


Grade B rents to rise further throughout 2016

Arup is due to complete on the top two floors at 3 St Paul’s place upon practical completion at a record headline rent of £23.00 per sq ft. 

There has been a small rise in rents for good quality grade B space, at £14.50 per sq ft and we expect this to continue to rise throughout the year, as occupiers look to acquire good quality stock but without paying prime rents. 

Prime out-of-town rents remain stable at £14.00 per sq ft. 

Lack of stock brings investment market to a halt

After a marked improvement in Q3, the Sheffield office investment market came to a grinding halt in Q4 2015; a product of the limited stock coming through rather than lack of demand. 

With prime office yields standing at c. 6.75%, Sheffield still represents good value compared to London, Manchester and, a lesser extent, Leeds. As such, we expect investors to take advantage of the asset management opportunities available in order to drive returns.

View the latest edition of our UK Investment Transactions (UKIT) report. 

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