Demand in UK regional office markets beginning to outstrip supply

GlasgowThe latest report from property consultancy Savill’s looking at trends in the UK’s commercial property market paints a now very familiar picture of an increasingly healthy market driven by a number of sectors in general and the tech and media industries in particular, but also of growing confidence outside of London. It also highlights a marked shift away from public sector to private sector employment. Although the upsurge in demand is putting pressure on the supply of appropriate office space in certain parts of the country, a new report published today by KPMG also highlights the growing order books of UK construction firms and an increase in confidence amongst builders.

According to the report, which can be viewed here:

  • The availability of Grade A office space in the UK’s major cities has fallen by 11 per cent over the past year.
  • Coupled with the low level of development outside of the capital – just ten schemes in the whole of the UK – investors are attracted to the regions because of the high yields. But one man’s yield is another man’s cost and this will mean increased rents in those regions most affected by inadequate supplies of Grade A space.
  • Private sector employment grew by 400,000 in the year to June 2013, with large rises in Yorkshire and Scotland, easily offsetting the 100,000 job losses in the public sector.
  • Some sectors are thriving. Professional services employment in the North West saw a 9 percent rise in the past year.
  • Even the Technology, Media and telecommunications (TMT) sector most traditionally associated with the South East. The reports cites research from Oxford Economics which forecasts growth in TMT employment  across the UK by 9 percent over the next five years.

In a separate report from KPMG, the majority of construction companies in the UK are now confident about the growth prospects of their industry. KPMG’s Global Construction Survey 2013: Ready for the Next Big Wave claims that companies are enjoying improved order books and profit margins and many are planning to expand their businesses. The survey of 165 business leaders found that 73 per cent of businesses are either ‘positive’ or ‘very positive’ when asked to describe their outlook over the next two to five years.