City centre rent in Leeds rises 19 per cent since start of pandemic to £38 per sq ft

Overall take-up of office space reached 349,332 sq ft in the first six months of 2024, buoyed by a particularly strong first quarter of this year. Underpinning occupier demand was the finance, banking, insurance and professional services sectors, which accounted for half of total office space leased this year.

However, the largest occupier deal to complete was the 43,713 sq ft letting of Joseph’s Well to Leeds Teaching Hospitals NHS Trust.

Eamon Fox, partner and head of development at the Leeds office of Knight Frank, said: “With strong occupier demand and supply-squeezed market, forecasts indicate that prime rents will reach £40.00 per sq ft by the end of 2024.

“We have several transactions agreed and progressing through legals at £39 per square foot, with £40 per sq ft being the next milestone. The market is such that transactions are no longer rent sensitive, but amenity and quality is scrutinised more than ever by our occupier customers. When we get this right, we see growth in rents.”

“Grade A availability fell to 192,841 sq ft at the mid-year point, a figure 18 per cent below that in the first six months of last year 2023 and 28 per cent lower than the 10-year average for Leeds. The total market vacancy rose marginally to 6.8 per cent, from 6.3 per cent recorded at the equivalent period last year.

“There is now 428,489 sq ft of speculative office space under construction across seven buildings in the city. Comprising both brand-new builds and comprehensive refurbishments, delivery is scheduled throughout the rest of 2024 and during 2025-2026.”

Investment volumes totalled £24.75m between January and the end of June this year. Comprising four major deals, the total is 25 per cent higher than in the first half of 2023.

The largest deal was 7 Park Row, which was bought by financial services firm Firefly Capital Limited for £8.35m. Prime yields remained stable at seven per cent.

According to Knight Frank’s report, the strong occupier market will mean that investors remain largely bullish on Leeds offices. With prime office yields unlikely to soften further, although secondary yields are more difficult to predict, it appears they have reached a level at which investors are more comfortable to deploy capital, all of which is hoped to foster market activity for the rest of this year.

The report concluded: “A clear election result brought much-needed political stability, whilst the ONS confirmed that the UK recorded positive economic growth in Q1.

"Inflation is also seemingly under control, which has allowed for the first interest rate cut since 2020 and improved the likelihood of further cuts ahead. Moving forward, each of these will support the desired stable backdrop for businesses and consequently, commercial property activity in the latter half of 2024.”