A flight to quality will see top UK office rents continue to rise

Top rents will continue to rise across the UK’s regional office markets, despite political uncertainty, as occupiers raise their demands, according to a leading commercial property expert.

Sam Jones, asset manager at M&G Real Estate.

Sam Jones, pictured, asset manager at M&G Real Estate, the property fund management arm of M&G, which owns Central Square in Leeds and 3 St Paul’s Place in Sheffield, said prime rents would continue to be overtaken in key cities as occupiers raise their standards.

“Over the last four years, rents have grown a lot.

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“Headline rents for Leeds were £26.50 per sq ft but our best deal at Central Square is £32 per sq ft. That is true for all regions. Prime rents keep on being overtaken as new stock is built,” he said.

He added that occupiers now expect more than they did even five years ago.

Focus on service and a hotel-style welcoming environment are important to businesses, Mr Jones said, as well as the desire for a great working environment.

The seven-storey Central Square building, which was completed in 2016 and is fully-let to companies including PwC, houses a winter garden where work meets play in a public square that includes shops and cafés.

Mr Jones said: “As an asset manager, if you can buy or build what the occupier wants, you will have a successful building.

“Central Square was a passion project, not just another office roll-out.”

Demand for office space across Yorkshire fell during the first three months of this year, a survey reveals.

The recent RICS UK Commercial Property Market Survey, found that a lack of movement on Brexit continues to deter investors and occupiers in the region.

Four per cent of commercial surveyors saw a rise in demand for office space during the first three months of 2019 (down from 24 per cent the previous quarter).

Respondents noted a rise in vacant offices.

But Mr Jones insists there is still life in Yorkshire’s office market.

He said: “The velocity of the market has slowed down a bit because occupiers are considering what they want to do with their businesses.

“But there is still velocity there when people see the right product.

“The availability of grade A office space is relatively low in Leeds so if an occupier wants to move somewhere they have to move quickly.”

He added: “The Sheffield market has slowed in recent months but if there is an enquiry that fits our size bracket then 3 St Paul’s Place is always on the list.”

Following on from the success of the Central Square development, M&G Real Estate has a number of other office developments in the pipeline, including projects in Manchester and Birming- ham.

There aren’t any more development plans for Yorkshire in the pipeline, although Mr Jones said the company was looking for opportunities.

He added: “Different funds have different requirements. We are always open to opportunities when the right thing comes along,” he said.

Looking ahead, Mr Jones added: “I think the flight to quality will persist in the office market.

“If you have a sub-standard product you will be left behind. It’s a competitive landscape and it matters that what you have is great.

“The market will not stop still but in a poorer environment if you haven’t got the right stock you will struggle more.”