Our latest Sheffield Office Market Pulse also revealed that a total of 15 deals were completed during the first quarter on 2018, underpinned by the professional services sector which accounted for 36% of total activity.
Notable transactions included Spaces’ 25,000 sq ft letting at Acero Works and the Home Office’s relocation to 21,000 sq ft at Foundry House.
Across the city centre, grade A supply fell by 25% over the quarter to just 110,000 sq ft which is split across seven buildings. Out-of-town, the situation is much worse, with just 16,285 sq ft of grade A space available across four buildings.
While Vidrio – the next phase of development at Digital Campus - is likely to be on site over the next few months, there is currently no other new space coming to market. The problem has been compounded by much of the secondary office space in the city centre being converted to residential and student use.
The continued diminishing supply has resulted in an increase in rents across all grades with a new headline rent of £24.50 per sq ft set at Acero. Repositioned grade B buildings continue to perform well, seeing solid rental growth against a backdrop of restricted supply under the dual pressures of increasing take up and permitted development schemes removing secondary and tertiary stock from the market.
Tom Burlaga, Associate Director at LSH’s Sheffield office, commented: “The lack of grade A space across both the city centre and out-of-town markets is of significant concern. However, the fact that repositioned grade B buildings continue to perform well is likely to pave the way for further refurbishments which will hopefully alleviate any pressure until such time that new schemes are brought forward.
“The Council’s recent publication of its Heart of the City II masterplan is welcomed and, although the plans have had a long gestation, the silver lining over the delay is that the proposed scheme now allows for a better mix – of retail, leisure and office – than the original Retail Quarter scheme and we can look forward to a 24-hour city with a considerably enhanced bar, hospitality and leisure offer which is crucial if Sheffield is to attract increased inward investment.
“Occupiers will no doubt begin to plan ahead in confidence rather than adopting a ‘wait and see’ approach. The sooner we can see spades in the ground and cranes on the horizon for Heart of the City II, the better.”