Leeds office take-up “third highest on record,

During the second quarter of this year, the office take-up in Leeds exceeded 213,000 sq ft and was the third highest on record, according to global property consultancy Knight Frank.

For the first six months of 2015, Leeds city centre take-up was over 300,000 sq ft, which is a substantial improvement on the first six months last year.

66% of the total take-up during this period was Grade A space, and there were a total of 43 transactions.

Eamon Fox, partner and head of office agency at Knight Frank in Leeds, said: “The biggest deals were pre-lets to PwC at Central Square (49,650 sq ft) and Addleshaw Goddard at 3 Sovereign Square (51,531 sq ft). The second Addleshaw Goddard letting was the largest pre-let in the city in recent years, which demonstrates the level of confidence in the city’s economy.

“Another highlight was Equifax’s acquisition of 19,784 sq ft at 6 Wellington Place, which made this scheme virtually 50 per cent let prior to completion.

“The supply of Grade A space is expected to increase further, with many new developments under construction and expected to complete over the next 12-18 months. Indeed, building new Grade A offices is currently almost as cost effective as a good quality refurbishment, once overall occupational costs are considered. A good example of this is 9 Bond Court where a rent of £25.00 per sq ft has been achieved.

“Leeds still lags behind the other regional centres in terms of headline rents, with the current figure standing at £26.00 per sq ft. However, the PwC deal may have been agreed at slightly more than this, which could be an indication that rents are edging up.

Mr Fox added: “There is still a healthy level of occupier demand and take-up is on target to exceed 600,000 sq ft for the full year.

“Demand for owner-occupier accommodation remains strong, albeit this faces competition from the residential development market which continues to be very active.”

Knight Frank reported that the occupational market remains buoyant, with a large amount of active requirements and full-year take-up expected to be around 600,000 sq ft.

Although new developments were expected to boost supply in the medium term, the more immediate term would see a squeeze on supply which will put rents under pressure, with headline rents expected to reach £28 by the year-end.

Henrie Westlake, partner and head of investment at Knight Frank’s Leeds office, added: “The recent announcement of Legal & General’s acquisition of a 50% take in the Thorpe Park regeneration scheme in east Leeds is a huge vote of confidence in the city. The scheme will provide around 7,000 new homes and a million sq ft of office space.

“Investment volumes in the first half of 2015 amounted to £97.3m, down on the £151m recorded in the second half of last year, but in line with figures seen at the half way point in previous years.

“There were nine deals in the first six months of this year, the majority of which were under £10m, with two significant deals above £30m.

“The largest of these was Valad Europe’s £37m acquisition of St John’s shopping centre from Hermes. The centre has 83,000 sq ft of office space, most of which is occupied by William Hill and Sanef.

“The other significant deal was Patron Capital Partners’ acquisition of The Mint, Sweet Street, from Deltalord. The purchase price was £30.3m, reflecting a yield of 7.5%.

Mr Westlake continued: “Prime office yields stood at 5.25 per cent in June, down from 5.75 per cent in December. Going forward, yield compression is expected to slow. However, keener yields may be achievable on new “absolute prime” buildings. The city has numerous new developments coming through which will provide an increasing number of opportunities to source stock.”

Stephen Hodgson, head of regional offices, Knight Frank, also commented: “Improved occupier confidence has led to a surge in pre-letting activity and high levels of take-up across the main regional office markets in Q2, which we anticipate will be reflected in rental growth and further starts on new development schemes over the next 18 months. On the investment front, despite the fact that yields are approaching historic lows we also feel that there is scope for further yield compression.”

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