Lack of space pushes up top office rents

Spotlight: Leeds Cross Sector report, which is published today by property agent Savills, highlights that a shortfall in the new build development pipeline in Leeds city centre could start to push up top rents from their current figure of £28 per sq ft.

It warned that the city region, which includes Leeds, Bradford, Wakefield, Calderdale, Kirklees, Craven, Harrogate, Selby, Barnsley, and York, must address its housing and workplace shortfall to continue to grow.

“Leeds City Region is undergoing a dramatic transformation, driven by economic growth, a strengthening financial services sector, a large student population and increased inward investment,” wrote Michael Barnes, the report’s author.

Savills reports that strong take up in the office market has been a catalyst for development and 47 per cent of space delivered in Leeds in 2016 is already pre-let.

Recent significant deals include Sky Bet taking the last remaining space at the recently built 6 Wellington Place and Ward Hadaway taking the top floor of 5 Wellington Place, while Central Square saw a further floor leased to RSM.

While the city centre’s new build development pipeline appears robust with 109,000 sq ft due to complete by the end of 2017, the report said this falls far short of the average annual take up of circa 250,000 sq ft of prime office space. Alongside this, there are a limited number of refurbishments.

Savills highlights the expansion of the tech sector, which is expected to grow by 5.6 per cent over the next five years, creating 6,400 new jobs. This compares to 2.8 per cent growth over the last five years, which has added a further dimension to Leeds’ established financial, professional and healthcare sectors.

Additionally, the delivery of the second leg of HS2 into Leeds will deliver further economic stimulus and could create up to 20,000 jobs.

With an estimated two million sq ft of lease events anticipated by 2020 and city centre take-up expected to reach a record-breaking one million sq ft in 2017, there is a growing need for city centre development, according the report.

Paul Fairhurst, head of Savills Leeds, said: “Although office rents are rising, Leeds is still great value compared to Manchester and Birmingham and, with London rents higher than ever, we expect ‘north-shoring’ to remain a theme as businesses look to control costs in a more uncertain world.

“Yet with new accommodation rapidly being absorbed, Leeds City Region ultimately needs to address the demand for more housing and commercial space if it is to continue to attract investment and remain a key UK office market.”

The office market is quieter outside Leeds with prime office rents standing at £16.50 per sq ft in York and Wakefield. Growth outside Leeds city centre will initially be driven by industrial logistics and manufacturing where rents are expected to rise by 5.5 per cent by the end of 2019, according to the report.

The region continues to be a popular choice for inward investment, recording its strongest year since 2006 last year, boosted by demand from overseas investors.

New lease of life for city offices

OFFICE conversions in the centre of Leeds are improving the city’s education offering, according to Savills.

A number of offices are being converted to educational use in a bid to take out some of the obsolete office stock within the city centre and promote a mixed use environment. Elliot Hudson College is to move to HSBC’s former office on White Rose Office Park and there are plans to turn the former KPMG office into a secondary school.

The report added that there were signs of an emerging education district in the south east of the city centre. “The hope is that Leeds’ education sector will bridge the gap between education and the workplace, help retain the ‘talent pool’ within the city centre and facilitate housing demand going forward,” it added.