Development of commercial space ‘still lagging economic growth’

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YORKSHIRE is one of only two English regions to have seen an increase in commercial property development over the last year, according to a new survey.

The study by JLL and Glenigan found that major schemes in Beverley and Leeds have made a “significant contribution” to the sector’s revival.

According to the Commercial Construction Index, £1.7bn of commercial projects were started across Yorkshire over the 12 months to June 2014; a 7.3 per cent increase on the previous year.

The Flemingate redevelopment in Beverley and Central Square in Leeds helped to boost this figure.

Work began on £22.7bn of commercial projects in the UK over the 12 months to June 2014, an increase of 6.6 per cent on the previous 12 months. Unsurprisingly London was easily the strongest single contributor, accounting for almost a quarter of the entire UK total (£5.5bn).

A JLL spokesman said: “The development of new workplaces, shopping centres and industrial facilities is playing an increasingly important role in Yorkshire’s economic recovery, however the index also highlights concerns that the development of commercial space is still lagging the UK’s booming economy – and could prove a constraint with time.”

Jeff Pearey, lead director – North East region at JLL, said: “The volume of commercial space being started in the region has not risen substantially since the recession and is still significantly behind the position before the crisis.

“There is evidence of an increasing supply shortage, particularly in the office market. Grade A vacancy rates are now below two per cent in Leeds, and while we have seen a seven per cent increase in construction starts over the last year, the amount of development needs to accelerate if this is not to hamper longer term recovery.

“Occupier interest in Yorkshire continues to build although the absence of new buildings remains an issue in the office and industrial sectors. Availability of development finance is still the major issue however.”

Of the major commercial sectors, retail enjoyed the biggest improvement, with new project values increasing by 19.2 per cent to stand at £2.3bn. Significant projects included the refurbishment of Selfridges in London and the refurbishment of the Mailbox in Birmingham (Q4 2013), as well as Westfield’s restarted Broadway Shopping Centre in Bradford (Q1 2014), which helped buoy the overall Yorkshire total also.”

JLL warned that, while construction work has picked up, with new building and refurbishment projects across the region, conditions for contractors remain tough. As the market has lifted, materials prices have risen to record highs while a “long and deep industry recession” has depleted the supply of skilled labour, JLL said.