Leeds set for wave of cash from investors

Alex Whiting, the Leeds-based senior director of capital markets at CBRE, said there had been a real improvement in the number of fund managers looking to invest in Leeds over the last three or four months, following a “dreadful period” that had affected Yorkshire and much of the north east.

Mr Whiting said investors had “piled in” to the south east, and the wave of cash from London had hit Birmingham and Manchester, and was now hitting Leeds.

Mr Whiting’s bullish assessment was shared by Andrew Marston, CBRE’s national research director, who said: “We’re seeing a more buoyant economic outlook. The outlooks for both 2013 and 2014 are being revised upwards...More institutional money is looking at the regions this year.”

However, the audience at the CBRE Market Insight Briefing was warned that the Leeds market was still suffering from a chronic shortage of new buildings, at a time when occupier confidence was starting to return to all areas.

The audience at the event, which was held at Aspire in Leeds, also heard that the new Leeds Arena was expected to lead to an extra 70,000 people staying overnight in the city each year, which would inevitably lead to demand for more hotels.

Jonathan Shires, the head of office agency at CBRE, said: “All we need is a five-star hotel and some Premier League footballers to fill it.”

Responding to an audience question about the lack of speculative schemes in recent years, Mr Shires said: “Unless you had £100m to sink into the ground, the funding hasn’t been there for speculative developments.”

There was also praise for the £350m Trinity Leeds scheme, which has attracted big name retailers.

Mr Shires said: “Trinity has certainly put Leeds back on the map.”

Trinity had provided a shot in the arm after a dire year, and it had helped to attract retailers like Victoria’s Secret, Mr Shires added.

In the Leeds city centre market, only six deals were completed in 2012, with a total value of £61m.

This was down from a total deal value of £120m in 2011, and £160m in 2010.

So far, nine deals have been completed this year, with a total value of £117m.

The biggest deal so far this year, was the sale of the 88,200 sq ft Toronto Square by Highcross to M&G for £29m.

Other major deals included the funding of KPMG’s new 66,000 sq ft regional headquarters by British Steel Pension Fund for £25m.

Looking to 2014, Mr Shires predicted that the shortage of new buildings inside and outside the city centre would continue, with rents set to rise on well-placed stock. Mr Shires also predicted that there would be a resurgence in the refurbishment and redevelopment market, and a shift in the ways companies occupied space, with a greater emphasis on “hot-desking”, where an employee works at a temporary work-space, and paperless offices.

Occupiers would also have a strong focus on energy efficiency, he added.

CBRE also predicts that more retailers will move into Leeds, and shopping centres are likely to be dominated by leisure and restaurant operators. There is pent-up demand for prime restaurant space, which could lead to a rise in applications to change buildings into restaurants.

CBRE’s research also concludes that the secondary investment market is likely to benefit from the overcrowded prime market, with continued fund interest in Yorkshire.

Mr Marston predicted that there would be continued polarisation between prime and secondary property locations, and between London and the rest of the UK.

CBRE’s research also found that Leeds took pole position in a European table looking at percentage differences in growth, when compared with a 10-year average. In the second quarter of this year, Leeds came top of a list of 23 European city centre locations.

Mr Marston said that there were still areas of risk in the eurozone, with Greece and other peripheral countries remaining weak, and there had also been weaker than expected growth from the emerging markets.

He added: “There have been encouraging results from business surveys, in particular from the service sector.”