Office take up increases 27th April 2015

Regional office take-up was 11% above the five year average in Q1.

This was the sixth consecutive quarter of above-average take-up report DTZ, indicating ongoing occupier confidence in the major UK office markets outside of central London. For the first time since Q2 2012, overall office availability increased in the regions, most notably grade A availability, which increased by over a third. This was driven by various speculative developments nearing completion in a sign of confidence on the part of developers, with over 1.3m sq ft of speculative space due to be delivered in Manchester and Glasgow alone over 2015-17. Interest in these developments is high, with around a quarter of the space already pre-let and expected further lettings ahead of completion.

Notable schemes include One New Bailey and Two St Peters Square in Manchester; and St Vincent Plaza, 1 West Regent St and 110 Queen St in Glasgow. The recent increase is off a low base and most cities are still suffering from a shortage of availability. This is particularly the case for grade A stock, which has led to landlords taking a harder stance on incentives. Rent free periods have fallen 28% in the past year and headline rents are forecast to rise 8% on average over the next three years.

Ben Clarke, head of UK research at DTZ, said: “The increased speculative pipeline in regional UK office markets is good news for various key occupiers reaching lease events, but the total pipeline is still more than a third lower than completions during the pre-recession 2004-08 period. This strength in prime occupier markets is helping support investment demand, which eroded prime UK regional office yields by a further 20 basis points in Q1.”