Caution takes a toll on office take-up

DTZ's Research UK Property Times office market report said tenants hesitated to commit to deals between April and June because of uncertainty during the General Election and in the run-up to the emergency Budget.

Take-up in Leeds fell to 48,000 sq ft – the lowest quarter in six years. Average deal size was down, with all but two deals smaller than 5,000 sq ft.

Lower activity levels contributed to an increase in availability, although the amount of Grade A space continues to fall as occupiers take advantage of the current market to upgrade to better quality space.

Eamon Fox, associate director at DTZ in Leeds, said: "Take-up has been limited to less than 50,000 sq ft for the quarter and we expect a very similar figure for Q3 2010. While enquiry levels are down, encouragingly those that do exist have become more credible.

"We are seeing more of a desire to physically move premises. We expect a stronger finish in Q4 as some of the current enquiries are converted to actual lettings."

Investor sentiment in regional office markets also turned more cautious during the period.

Concerns about the economy, post-General Election, the impact of the Eurozone sovereign debt crisis and the fall in share prices continue to dampen investor confidence.

According to LSH's quarterly research, investment activity across Yorkshire fell during the second quarter of 2010 to just over 200m, compared with 233m achieved during the first quarter of the year.

While the region witnessed an increase in the number of individual transactions, the average deal price dropped by almost 25 per cent to just under 10m.

One of the biggest deals was the 40m purchase, by Gatehouse Bank, of the BT regional headquarters at 1 Sovereign Street, Leeds, advised by DTZ.

DTZ investment director Tim Cameron-Jones said: "I anticipate the second half of the year will see relatively low levels of investment trading activity."