Britain’s “Big Six” office markets outside London are showing no sign of slowing down after last year’s record take-up, a new survey claims. But, warns Jones Lang LaSalle’s (JLL) latest quarterly office market research, the number of non-residential construction starts for 2014 as a whole — at £23.8bn — was just 0.5 per cent above the total for the 12 months to the end of last September.
According to JLL, 2014 was the best performing year for the UK’s Big Six cities — Birmingham, Bristol, Leeds, Manchester, Glasgow and Edinburgh — with office take-up totalling five-million sq ft; equal to last year’s figure for London’s West End and the M4 Western Corridor combined.
In total the six city markets reported 1,080 commercial transactions last year, a 25 per cent increase on 2013. There was also a 43 per cent rise in the number of deals over 10,000 sq ft.
Jeremy Richards, head of national office agency at JLL, claimed the volume of Grade A office supply, at its lowest for 10 years, remains the real pressure point in the core six markets outside London.
“The Big Six vacancy rate is currently 1.6 per cent, lower than the other three markets we monitor: the West End, City of London and Western Corridor,” he said, “with occupier demand at its highest and rental increases last year in all but Birmingham, these ingredients are making for a very interesting cocktail for the year ahead.
“Landlords are now changing their quoting rents upwards. We have seen this in Bristol and Manchester so far and anticipate it will become more common-place as market conditions continue to shift away from the occupier.”
Big Six investment volumes hit £2.5bn in 2014, up £1.1bn on the previous year. Lot sizes also increased with 13 deals over £50m, compared to just seven over that figure the previous year.
The largest deal outside London last year was the £320m sale of One Spinningfields and Three Hardman Boulevard in Manchester. Activity in the Scottish markets returned during 2014’s final quarter following a subdued period in the run up to September’s referendum.
Richards said the survey also showed that speculative forward funding returned to the four English and two Scottish cities, with seven deals last year accounting for £450m of investment and encompassing 895,000 sq ft of new space.
In a note of caution, he said that although the Grade A office shortage is the catalyst behind the development of 16 schemes now underway across the cities, totalling 1.9m sq ft of new space, “with 400,000 sq ft already let, the volume currently being built does not correct the current supply and demand imbalance.”
