In key regional office locations, where grade A supply is restricted, developers should start building now so they can exploit the shortage of stock when the up-turn in demand returns in 2014.
According to our latest research, National Office Market 2011. These views are based on our research that showed that GDP levels are forecast to return to pre-recession levels by 2013 or 2014, which should lead to demand for office space increasing as a result. When completing this research we analysed 33 centres across the UK in seven regions.
Take-up of grade A up on five year average
Across the UK, in the year to date, take-up of grade A was 35% of the total, which is up on the average of 28% over the last five years. Regional office take-up is already on track to match 2010 and grade A supply will soon come under pressure in some markets.
Tony Fisher, National Head of Office Agency, explained: “Availability across the UK stands at 59.7m sq ft, which is 9m sq ft more than the market average. However, only 27% is grade A, and as occupiers shy away from secondary space we could argue that the stock currently available will not be able to fulfil occupier demand.”
Glasgow has lowest level of available grade A
In Glasgow only 15% of total availability is considered to be grade A, which is the lowest of the all the major regional centres. During the year to date, take-up of grade A space accounted for 40% of the total, as occupiers took the opportunity to acquire prime space on competitive terms. This has left relatively little grade A space in Glasgow city centre.
Bristol only has 50,000 sq ft of available grade A
In Bristol, 23% of the total available stock is grade A, which equates to 500,000 sq ft. Of this space, 350,000 sq ft is in the city centre, which is where most occupiers want to be located.
Cardiff has a six month supply of grade A
At just 200,000 sq ft (16% of the total), Cardiff has only six months of grade A supply at current take-up levels. The majority of the available grade A space is located out of town on smaller floor plates, which is likely to be considered undesirable by many occupiers.
Development in regions in at a 10 year low
Tony added: “Only 1m sq ft of speculative development is currently underway. Availability levels of grade A in key regional locations are therefore set to decrease further this year as lease events force occupiers to move or re-gear, leaving the market with little suitable stock.”
Developers should start putting spades in the ground
Commenting on how the market should respond, Tony concluded: “While demand will not return to pre-recession levels until 2014, any development that commences now is going to take two years to be finalised. So now is the time for developers to start putting their spades in the ground. Some bullish developers and investors could even profit sooner by refurbishing existing stock in markets where grade A stock is dwindling.”