Dramatic drop in deals in office market
Published on Thursday 7 April 2011 09:16 – To read the full article click here or buy todays Yorkshire Post! THE take-up of office space in Leeds city centre fell by more than half in the first three months of 2011, according to a new report. Data compiled by the Leeds Agents’ Forum, found that 36,759 sq ft of space was let across 14 deals compared with 85,000 sq ft in the first quarter of 2010. Experts expect a number of larger deals, including Asda’s expansion into 38,000 sq ft at The Mint building, in Holbeck Village, announced this week, to boost figures in the second quarter. Key lettings since January include Optimum 4 taking 8,299 sq ft at Bruntwood’s West One, on Wellington Street, and Randstad, who took 6,706 sq ft at 14 King Street. At the start of the year, two lettings at 10 South Parade, albeit for smaller suites of circa 2,400 sq ft, achieved a headline rent of £28 per sq ft. Glenn Levison, partner at Sanderson Weatherall and spokesman for the Leeds Agents’ Forum, said: “While transactional activity in the first quarter has been muted, on a positive note agents have reported increased levels of viewings which, combined with a number of larger deals which are currently in solicitors’ hands, means that market activity is anticipated to significantly improve in the second quarter.” According to the forum, it is unlikely one single group will drive the Leeds occupational market this year but it said there continues to be a good level of demand for office space of 5,000 sq ft or less, from a range of occupiers, including professional services, media and recruitment industries. Occupiers are also growing increasingly aware of the lack of Grade-A choice and some, including Walker Morris and KPMG, have started to think about entering into discussions to build new offices ahead of lease expiries. The Medical Protection Society, the world’s largest medical defence organisation, is looking to almost triple the size of its Yorkshire office to accommodate growth that has already taken place, and anticipated future growth. The organisation, which has occupied Granary Wharf House, in Leeds, since 1994, has appointed John Webster, at Carter Jonas, to search for 55,000 to 60,000 sq ft of Grade-A office space, to either lease or buy, within easy walking distance of Leeds station. Granary Wharf House, comprising approximately 21,000 sq ft of office space with car parking, has been put on the market at a quoting price of £5.25m. In the Leeds out-of-town market, 55,481 sq ft of space was let in the first quarter with key deals including 12,124 sq ft let to UK Lease Management and Morrison Facility Services taking 8,863 sq ft at Junction 7 Business Park, off the M621. Meanwhile, a new report by CB Richard Ellis (CBRE) believes the “robust” nature of the Leeds office market, along with the returning strength of the private sector, will weather the forthcoming public sector cuts in the long term. The Office of Budget Responsibility estimates a total of 320,000 general government job losses in the next five years. CBRE’s UK Regional Offices Viewpoint found that the total office-dependent public sector workforce represents approximately 10 per cent of employment across regional office markets. More than 1m sq ft of office space in Leeds is occupied by central government. Jonathan Shires, director of office agency at CBRE in Leeds, said lease expiries will generate opportunities to consolidate into more efficient buildings and this may bode well for Leeds’s modern office accommodation and the city could witness modest demand for Grade-A stock as a result. He said: “Take-up by the public sector had already slowed throughout 2010, with pressure placed on private sector businesses to lead the country out of recession. This will continue in the wake of the new, expected job cuts. “It is, therefore, encouraging that the main source of private sector demand for office space, the financial and business services sector, is forecast to see stronger nationwide growth over the next five years, which should, hopefully, outpace the losses expected from the public sector. He added: “While the forecast job losses present additional pressure at a challenging time within the regional office market, we remain confident in the robust nature of the Leeds office market, along with the returning strength of the private sector, to weather the changes.” A recent report, by property agency DTZ, said occupiers in Leeds benefited from savings in 2010 as costs fell by five per cent due to falling rent. The cost per workstation in Leeds is £4,310, with only Newcastle and Cardiff being less expensive. The Leeds Agents’ Forum was established to collate and distribute definitive market information. Its members include BNP Paribas, Carter Towler, CB Richard Ellis, Colliers International, DTZ, GVA, Jones Lang LaSalle, King Sturge, Knight Frank, Lambert Smith Hampton, Sanderson Weatheralls, Savills and WSB.
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