Member Article

Leeds office rents set to hit record high

Investor confidence in the regional office market has surged to an 8-year high according to Knight Frank’s latest Regional Offices Market Presentation (ROMP) report.

Total investment in regional offices in the first nine months of 2015 reached £3.1bn, the highest total for the time period since 2007.

In Leeds, Knight Frank forecasts that headline office rents will increase to between £27.50 and £28.00 per sq ft by the end of the year, their highest ever-level.

Eamon Fox, partner and head of office agency at Knight Frank in Leeds, commented that the return of investor confidence to the regional office market was tremendous news for the city.

“The third quarter of 2015 has been dominated by smaller deals. Altogether there were 36 office deals totalling 115,000 sq ft, the majority of these deals were mainly sub-3,000 sq ft,” said Mr Fox.

The biggest city centre deals were the Church of England’s acquisition of 17-19 York Place and the letting of 8,718 sq ft of 1 Trevelyan Square on Boar Lane to the Department of Health.

“Overall, we may well reach 600,000 sq ft of take-up by the end of the year, which is 21 per cent above 10-year average and 25 per cent over the five-year average. Headline rents are strengthening, too, with £26 per sq ft a reality rather than a bargaining tool. As a result, we expect top rents to rise to between £27.50 and £28.00 by the end of the year.

“There’s more good news. Activity in the Leeds out-of-town market reached 72,314 sq ft with 21 deals during the quarter, compared to 35,305 sq ft over the same period last year. The overall level of activity in Leeds and out-of-town is extremely encouraging.”

Mr Fox added: “The ongoing supply issue for good quality space has been well documented. This scarcity, combined with the new builds and refurbishments coming through, are the drivers pushing rents up to pre-recession levels.”

Lee Elliott, partner and head of commercial research at Knight Frank in Leeds, commented: “Regional opportunities have become more attractive to investors as leasing markets have strengthened. With the weight of money targeting markets outside London rising, we expect bidding to become more aggressive and place pressure on pricing.

Henrie Westlake, partner and head of investment at Knight Frank in Leeds, commented: “With investor demand increasing for regional opportunities, prime yields are hardening.

“This continues the trend of yield compression recorded in 2015 with Leeds leading the way with a reduction of 0.50 per cent to 5.25 per cent, which is excellent news for those who have already invested in the city,” he added.

Stephen Hodgson, head of Knight Frank regional network, commented: “The increase in occupier activity in the regions (somewhat behind the London curve) is good news and very fortuitous for those investors that entered the regional markets first. This continuing trend will give longevity to the recovery in Regional Capital markets and should kick start much needed new speculative schemes.”

This was posted in Bdaily's Members' News section by Robert Beaumont .