Office news update 13th March 2013

The UK is running out of Grade A offices at an alarming rate with most of the UK’s leading cities potentially facing chronic undersupply within as little as a year. According to GVA’s Tipping Point supply of Grade A office space in five of the UK’s major regional cities is under significant threat unless more speculative development comes on-stream.

Carl Potter, Senior Director and head of National Offices at GVA, said: “It’s no secret that the UK’s Grade A office pipeline is shrinking quickly. However the scale and repercussions of this event hasn’t appeared to have fully caught on. Our research points to an alarming set of potential circumstances. Manchester could see a tipping point occur as early as this year, whereby demand starts outstripping supply. The same could happen in Edinburgh next year. Birmingham, Leeds and Bristol could see demand surpass supply in 2015.

“The repercussions of a serious lack of Grade A office space in our leading cities will mean our attractiveness to corporate occupiers both here in the UK and overseas could be significantly compromised.” The report illustrates how the next five years will see huge volumes of lease expiries creating a reverse in market dynamics whereby demand very quickly absorbs existing available space.

Other factors including inward investment from occupiers seeking city centre HQs and proposed capital investment into transport upgrades and infrastructure will also encourage increased occupier demand. The report outlines how historically occupier demand has been supply led (i.e. driven by the availability of existing space) with many occupiers not having the time or foresight to consider pre-lets. The availability of oven-ready space is fundamental to the health of the office market and to enable cities to maintain their competitive edge.

Potter continues: “With major capital investment in public transport infrastructure projects in a number of our leading regional cities, a number of which are due for completion by 2015, the opportunity for investment in speculative office development over the coming three to four years is perhaps at its greatest level since 2000. As the existing and under construction supply is absorbed and with no further committed speculative space in the pipeline, on the face of it a clear window of opportunity exists to bring forward development completing from 2015.”