The Leeds Office Market
- an Insight

Introduction

Current estimates suggest that the City of Leeds has an existing office stock in the region of approximately 1.3 million sq m (14 million sq ft).

Office occupiers have traditionally populated the area that has a perimeter made up of Park Row, Wellington Street, Queen Street and The Headrow. The prime core defined as north of Sovereign Street in the South up to The Headrow in the North and the Inner Ring Road to the west to Park Row in the East will see

The need for larger sites to accommodate demand has created a shift southwards past the Rail Station and over the River Aire, and westwards along Wellington Street and Aire Street.

The majority of central office development is situated within a radius of half a mile of the Station and around Leeds City Station and South of the River Aire, where larger sites have been available.

The advent of City Living has seen many of these developments form part of mixed use schemes incorporating residential, restaurants and bars.

It is a matter of opinion but it the prime core is now redefined as being the area north of Sovereign Street up to The Headrow and from and the Inner Ring Road to the west to Park Row in the East.

Office Market Activity

As 2007 drew to a close there had been uptake of 41,820 sq m (450,000 sq ft) in the city centre with almost 100 transactions of which approximately 80% were for space of less than 929 sq m (10,000 sq ft.). Half of those were between 186 sq m and 465 sq m (2,000 and 5,000 sq ft.).

These annual take up rates are broadly reflective of the 5-year average of 51,115 sq m (550,000 sq ft) of which over 27,881 sq m (300,000 sq ft) was prime space.

It is clear that the smaller occupier sector has been busier in 2007 however there were notable lettings such as a professional advisory firm taking 1,765 sq m (19,000 sq ft) at Bridgewater Place, a serviced office operator taking 2,230 sq m (24,000 sq ft) at No. 2 Wellington Place and a public sector tenant expanding their occupation to almost 2,788 sq m (30,000 sq ft) at No. 1 Trevelyan Sq, Boar Lane. Rentals have ranged between £19 and £23.50 per sq ft.

Rental Values

Rents of up to £2,750 per car space per annum are being achieved on prime secure parking spaces.

The Developers of the 16,265 sq m (175,000 sq ft) City Square House scheme adjacent to the Station will hope to set new rental precedents off quoting rentals of up to £28.00 per sq ft when construction completes in towards the end of 2009.

Rentals at 2 City Walk within the City Centres southern quartile have reached £20.00 - £20.50 per sq ft with major lettings to tenants engineering consultants and a leisure services operator.

Car parking rentals of £1,950 per car space per annum have been achieved at the same development.

Rentals for 1970's and more recent refurbished space with comfort cooling and raised floors are close to £20 per sq ft and £22 per sq ft respectively.

Supply

• Grade A - New Build

  As of the beginning of 2008 there were only a few schemes due to start on site over the forthcoming year. The unexpected level of activity in preceding years saw a perceived over supply of space in 2007 soaked up and planning delays resulted in few new schemes starting on site that year.

  Towards the end of 2007 just over 13,940 sq m (150,000 sq ft) of new build prime space was completed in the city centre. Average annual take up rates suggest that Leeds will provide occupiers with little choice for a couple of years while new schemes are developed out.

• Grade B - Quality refurbishments

  A restricted supply of only 11,152 - 13,940 sq m (120,000 - 150,000 sq ft) of space is expected for the period up tot the end of 2008.

Looking at the longer term, there will be a greater supply although it appears that much of the space that comes on stream over the next 2-3 years will be refurbishments or schemes situated outside the traditional core office area and even straying beyond the more recently established locations.

Between the beginning of 2009 and the end of 2010 there may be in the region of 69,700 sq m (750,000 sq ft) of prime and quality Grade B space that comes on stream across the wider office locations referred to above.

Office Demand Forecasts and Anticipated Growth Sectors

Using a ratio of 1 person occupying 13.94 sq m (150 sq ft) each, this equates to potential demand of more than 4 million sq ft of office space within this period.

The key growth sectors that are expected to create this demand are from the, Banking, Financial Services, Business Services, Education, Health, I.T. and Communications industries.

Summary

I particular we forecast that the lack of prime space will see rents increasing for both quality refurbished and new offices in the city core to as much as £28.00 per sq ft. this could increase competition for space and therefore a greater level of prelet activity.

In the face of this lack of supply there has never been a better time to consider using the specialist service that we can provide. Some Landlords and vendors will respond to these market conditions by offering less in the way of price reductions and incentivisation. Using our experience and contacts we will identify where the best deals are. The underlying principle of this service is to drive rents and prices down on behalf of our clients.

• Graph of Future Office Demand & Employment Sectors
• Offices in Leeds