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CBRE Leeds Offices Report

According to new research from property firm CBRE, The Leeds office market can reflect on a positive last six months led by large occupiers many of whom are sacrificing prime locations in favour of attractive deals, larger floor plates and top quality accommodation.

After a particularly strong first quarter demand over the first six months has been healthy, with a total H1 take up of 217, 681 sq ft, in line with the historic half yearly average at this time of year. Prime rents have also remained stable at £24 per sq ft with incentives of around 24-36 months rent free on 10 year terms. Although secondhand rents are likely to continue to fall this year, CBRE predicts the result will be real value for money space on the market for occupiers who want good quality stock with flexible lease terms.

Jonathan Shires, Director of Office Agency at CBRE in Leeds said; “Positive take-up through H1 shows there is an appetite from the larger occupiers for new space, who recognise the excellent deals on offer and are using lease events and their covenants to secure Grade A space. It is encouraging to see Landlord’s creating refurbished Grade A space which help to fill the predicted shortfall. Nevertheless we are yet to see signs of developers preparing to break ground unless they have a 100% pre-let in place. This is representative around the UK and looks set to continue unless yield profiles and availability of finance return to their favour.

“The existing larger stock is leasing well, particularly the larger floorplates in Grade A buildings such as No.1 Leeds which is almost fully under offer. The outlook for the rest of the year remains positive with three refurbishment projects on site this year at 21 Queen Street, 100 Wellington Street and 1 Aire Street, and KPMG’s pre-let signing on Sovereign Street imminent.”

The office investment market in the first half of 2012 paints a more challenging picture with just two deals totalling £37.9M transacting. This includes 100 Wellington Street, sold to Bruntwood for £2.5M and Princes Exchange sold to Credit Suisse for £35.4M. The second half is unlikely to witness much improvement although Town Centre Securities recently acquired 6-7 Park Row for circa £7M and two sales are being marketed; No.1 The Embankment at £10.25M and St Paul’s House £14.4M .

Alex Whiting, Senior Director of Investment at CBRE Leeds, said “We are seeing a lack of demand for offices in Leeds due to concerns over the regional economy. That said, prime well-let opportunities are still attracting interest from UK and overseas funds and private equity syndicates”.

“The reduced levels of investment transactions in H1 look set to continue throughout the whole of 2012. Unless debt finance becomes more readily available, we are unlikely to see a significant improvement in the market.”

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