December 1, 2015
Demand for prime office space in key regional business hubs is strengthening, driven primarily by the professional services sector, according to a review of market trends in the UK property markets by Cushman & Wakefield. Manchester is the strongest performing regional office market, with several large transactions recently completed, but a number of other cities, such as Bristol, are also in hot demand. The Thames Valley, South East and West Midlands have been the strongest performing regions in 2015, and prime rents in the top office locations have reached new highs, with further growth forecast. While overall take up is being constrained, to a certain extent, by the lack of prime stock new commercial property developments are picking up as a result, but are still some way below what is required to meet demand levels and cities such as Glasgow, Manchester and Birmingham have all seen reductions in availability rates.
The situation is particularly acute in Birmingham, which has less than two years’ supply of grade A space remaining. In London, occupational activity remains robust, with year to date take-up volumes reaching 9.7million sq.ft in September, 3 percent ahead of the same period in 2014.
All this activity is being driven by strong demand from professional services firms, who accounted for 27 percent of take-up in Q3. There is also strong demand from the Banking and Media & Tech sectors.
Pre-lets are still an important driver of activity, particularly for larger transactions, with a total of 2.4 million sq.ft signed in the nine months to September, which equates to around 25 percent of all lettings in 2015. Pre-let volumes have been boosted by some key transactions in the third quarter of this year, including Facebook taking 227,000 sq.ft at 1 Rathbone Place and Ashurst taking 275,000 sq.ft at the London Fruit & Wool Exchange.
In London, activity in the West End has moderated in recent quarters due to the lack of suitable offices, with vacancy rates close to historic lows and many occupiers struggling to satisfy requirements.
By comparison, the City, East London and Docklands markets are all seeing strong leasing activity, with Shoreditch and Canary Wharf, in particular, seeing an upturn in leasing volumes in Q3. The availability of space is expected to fall further over the coming months.
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