Wellington Place Leeds

Research - 25/07/2019

Leeds Office Market Pulse Q2 2019

Leeds replicated its strong H1 momentum in 2019, with office take-up reaching over half a million sq ft for the year to date.

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Take-up of office space across Leeds totalled 249,097 sq ft in the second quarter of 2019, boosting the H1 total to over half a million sq ft for the second successive year, albeit down some 20% on 2018 according to our latest Leeds Office Market Pulse.

TMT occupiers underpin demand

In the city centre, 27 transactions totalling 214,994 sq ft were completed during the three months to June 2019. Conversely, Leeds’ out-of-town market, which is characterised by a distinct lack of grade A supply, recorded its weakest quarterly performance in over two years, with total the total volume of space let during Q2 a fraction over 34,000 sq ft.

Occupiers in the technology, media and telecommunications sector accounted for two thirds of total space taken, which was largely driven by Sky Betting and Gaming/The Stars Group's 135,915 sq ft pre-let at 4 Wellington Place. Notwithstanding this single transaction, the sector was responsible for 31% of the total number of deals, reflecting the depth of activity within the Leeds market.

Of the 45 lettings to complete across the city centre and out-of-town markets combined, only 18% were for space over 5,000 sq ft, reflecting the lack of corporate occupier activity as a result of on-going political and economic uncertainty. More tellingly, only 33% took accommodation of grade A specification, which is indicative of the lack of available good quality space on the market.

Key occupier transactions

Property Size (sq ft) Tenant/Purchaser Landlord/Vendor
4 Wellington Place 135,915 Hestview Limited MEPC
Floors 1 - 5, 7 Park Row 23,498 IWG (Spaces) CBRE Global Investors
6 East Parade 8,008 Credit Karma Evanacre & Bridges

 

Acute shortage of supply will hamper future performance

There continues to be a severe shortage of grade A space within Leeds city centre, with less than six months’ supply left based on average take-up figures.

In the absence of any additional new development starts beyond the three speculative schemes currently under construction, the availability and choice of space for businesses currently looking to relocate which are not able to rely on a pre-let is extremely limited.

Out-of-town, the situation is even more acute with only one new development under construction.

This critically low level of supply is likely to hold back the performance of the Leeds office market in the short-term, albeit we’re expecting a number of pre-let announcements throughout the remainder of the year which could mask the underlying supply issues.

Air of positivity boosts rental levels

Leeds is currently surrounded by an air of positivity as far as occupier activity is concerned.  Following the recent announcement of Sky Betting & Gaming’s acquisition at 4 Wellington Place, £30.00 per sq ft is now considered to be the headline rent within the city centre.  However, while higher rents have been achieved for ‘one off’ transactions, where unique space is in high demand, we anticipate a cooling of rental growth in the coming months until the nature of the UK’s exit from the European Union is better understood.

That said in comparison to other Big Six centres such as Bristol, Birmingham, Manchester, Edinburgh and Glasgow, Leeds still presents good value for businesses considering relocating.  Given the limited availability of space, there is the potential for well-located, high-quality buildings to capitalise on the supply and demand imbalance and post new record rents.

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