UK regional office property market is resilient, research report suggests
Regional office property markets in the UK are proving to be resilient with certain sectors seeing growth despite an overall fall in take in last year.
The latest Knight Frank research report shows that annual take up totalled 4,930,430 square feet in 2012, 4% down on 2011 and 11% down on the 10 year annual average.
However, a number of markets enjoyed stronger 2012 take up compared with 2011 including Edinburgh which was up 47%, Glasgow up 15%, Aberdeen up 14%, Manchester up 10% and Leeds up 3%.
Other cities meanwhile saw reduced activity, such as Sheffield, Cardiff, Newcastle, Liverpool and Birmingham. The figures also show that take up in the final quarter was fairly stable at 1.22 million square feet, up 2% on the third quarter of 2012.
Transactions completed in 2012 comprised predominantly secondary space and relatively small lot sizes, the report says, adding that the focus on quality continued in most markets and there has been renewed requirements from professional services firms prompted by forthcoming lease expiries.
While the speculative development pipeline remains limited, the fourth quarter saw another quarterly increase from 661,431 square feet in the third quarter to 734,545 square feet. Despite the improved speculative activity, general sentiment remains cautious and developers will demand a significant pre-let before any large new build scheme can progress.
‘Generally the UK regions have witnessed a steady churn of office take up, with companies either consolidating operations into a single HUB building, or taking less space. In almost all cases, occupiers are looking to upgrade the quality of their space and hence the majority of demand is for new or recently refurbished Grade A accommodation,’ said David Porter, head of Knight Frank’s Manchester office.
‘This level of take-up is driving some regional cities towards a tipping point where the lack of supply of good quality space is such that a strong case for speculative development or the refurbishment of existing poor quality stock is emerging,’ he explained.
He also pointed out that most demand is focused on city centres and CBDs, although, certain out of town locations, particularly around major airports, have also seen high levels of take up compared with previous years.