Leeds records strongest prime rental office growth of any city outside London
The city’s prime rents stand at £37 per square foot, reflecting an increase of 23 per cent since the start of the pandemic.
This represents the strongest prime rental growth of the 10 city office markets analysed outside of London and the South East.
Prime rents across the UK’s office markets recorded notable increases since the start of the pandemic, with occupiers' flight to quality driving a supply and demand imbalance for best-in-class office space, underpinned by access to high-quality amenities, space on standout floors, and strong sustainability credentials.
Matt Willcock, executive director, office investor leasing, at CBRE, said: “Beyond London, our major city office markets are outperforming many of the major European markets - Berlin, Milan, Paris - in terms of prime rental growth and values.
“While broadly speaking take-up may have slowed, it’s clear there is healthy demand from occupiers seeking new, high-quality sustainable office space that enhances connectivity and wellbeing in a collaborative environment.”
Berlin’s prime rent growth since the pandemic stands at 16 per cent; Milan at 15 per cent; Paris at 14 per cent, followed by Amsterdam at 9 per cent.
By comparison, Bristol and Liverpool both recorded 21 per cent significant prime rental growth in the same period.
Edinburgh and Birmingham recorded 19 per cent growth, while Manchester recorded 18 per cent.
The trend also looks set to continue into the second half of 2023, as evidenced by Glasgow prime rent reaching £39.50 per square foot from the pre-Covid level of £32.50 per square foot.
Rental value growth has also been exceptionally strong in some South East office markets, most notably Oxford where prime rents at the end of the second quarter of 2023 reached £63 per square foot, an increase of 70 per cent from the level seen in quarter four 2019.
The increase has been driven by the lack of prime stock available and the huge growth of the science and tech sector, fuelling demand for office and lab space.
Simon Brown, head of UK Office Research at CBRE, said: “One of the consequences of the supply/demand imbalance for the best quality space has been rapid rental growth at the prime end of the market.
“Deals transacted since the start of this year have set record high benchmark rents in most cities and many city office markets are recording prime rental values ahead of pre-Covid levels.”
Despite overall take-up outside of London declining year-on-year by 13 per cent, demand for the best quality space was high across the whole of the UK in the first half of 2023.
Two of the three largest deals in the second quarter took place in newly completed space, led by RE-defined taking up 36,300 sq ft of new space at Louisa Ryland House in Birmingham
In tandem, the supply of new, grade-A space remains at critically low levels in some markets.
Earlier this year, a report by Avison Young found that office space take-up in Leeds had fallen in 2022, but was above the 10 year average. This take-up, the report noted, was driven by the city centre market.