The frenetic property boom of the ‘90s may seem like a distant memory, but its legacy is only now starting to become apparent. Guy Gilfillan, Head of our Yorkshire region, explains.
Scores of obsolete office buildings currently litter city centres up and down the country; a situation that has been somewhat accelerated across Yorkshire, owing to the sheer scale of development that has taken place over the last few decades.
High level of second hand stock in Sheffield and Leeds City Centre
So much so that in Leeds City Centre, more than 40% of the total available office space comprises poorer quality, inefficient second hand stock. The problem is amplified even further in Sheffield City Centre, with grade B and C stock accounting for over two thirds of the total available office space.
While Yorkshire’s office markets suffered a significant decline in occupational activity during 2010, overall City Centre take-up figures in Leeds and Sheffield totalled 406,220 sq ft last year against a figure of 627,528 sq ft from the previous year – demand for grade A space has remained stable.
Businesses more selective over the space they occupy
Fuelled by economic, legislative and technological advancements, businesses have been tuned into the operational and environmental impact of their working environment, making them more selective over the space they occupy.
This is reflected by the fact that almost half of all lettings across both Leeds and Sheffield City Centre’s during 2010 have been for grade A space; a trend that shows no signs of abating.
Limited level of grade A stock across Leeds and Sheffield
Current estimates indicate that Sheffield has just over 22 months of grade A office space remaining based upon the 2009 rate of take-up. And, while Leeds may appear more fortunate with approximately 4.3 years supply, 60% of the total grade A availability is comprised within just four buildings.
It's a two-tier market in Yorkshire
Dwindling occupier demand for second hand office space, coupled with the looming shortage of grade A accommodation has led to the creation of a two-tier market.
Rents for grade B and C space have fallen dramatically – in some cases by up to 40% from those set at the height of the market – and incentive packages across the board have increased as landlords desperately seek to attract tenants.
Conversely, headline rents for grade A space have remained robust, with Leeds City Centre witnessing a new record level of £27.00 per sq ft.