YORKSHIRE cities saw a shift in leasing activity in the first half of 2016 with more companies choosing to base themselves outside city centres for the first time in more than four years.
Research from property agent Lambert Smith Hampton (LSH) found that Sheffield’s out-of-town office market outperformed the city centre in terms of volume of office space leased during the first two quarters of the year.
Just two deals, comprising 11,500 sq ft, took place in the city centre, bringing the half year total to 36,000 sq ft, while the out-of-town market showed signs of improvement, with 24 per cent more space leased than the previous quarter to reach 40,675 sq ft for the six months.
The out-of-town figure was largely attributable to the high levels of churn within the professional services sector, which accounted for 58 per cent of the completed deals.
LSH’s Sheffield Office Market Pulse is in line with figures from Leeds, published last month, where the out-of-town office market outperformed the city centre for the second successive quarter.
However, across both cities, activity was markedly subdued during the second quarter of the year as businesses held off making decisions ahead of the EU Referendum.
In Leeds, 76,026 sq ft of offices was taken up by occupiers in the out of town market compared with 73,103 sq ft in Leeds city centre - a 46 per cent and 40 per cent decrease respectively compared with the first quarter of the year.
The research found that just 34,000 sq ft of space was let across the city in the second quarter. Tom Shelton, associated director at LSH Sheffield, said: “Following a stellar 2015, take-up was understandably down and this has been exacerbated by uncertainty in the lead-up to the EU Referendum.
“However, despite this general slowdown, enquiry levels have remained strong throughout the year and we expect the second half of the year to be more heavily loaded as businesses begin to move forward with their property decisions.”
LSH’s research found that activity in Sheffield’s office investment market fell back by 80 per cent in Q2, with just one transaction totaling £6m, though this was an improvement on the £1m completed during the same period in 2015.
Abid Jaffry, LSH head of capital markets north, said: “The general uncertainty before the referendum and resultant reaction to Brexit has seen office investment values fall.
“Sellers and buyers are therefore struggling to ‘mark to market’ as the political and economic swings make price certainty difficult. However, the depth of the regional market as a Northern Powerhouse is likely to provide less volatility than the central London market.”
Mr Shelton added: “News of the billion pound Chinese construction deal, confirmation that the HS2 station will now be located in the city centre, and HSBC’s announcement of its proposed relocation to the £480m Retail Quarter in 2019 are all positive indicators for future growth.”