Leeds's economy 'strong enough' to withstand economic shock

Leeds-based property consultant Knight Frank today claims that the long-term outlook for the office market in UK cities like Leeds remains positive, despite the economic devastation caused by the Covid-19 lockdown.

It claims that the region’s economy is more balanced than the period prior to the Financial Crisis of 2008-9 and that many construction projects in the region had been reconfirmed by developers, with work either due to start or continue in short order.

And one of the firm’s bosses said that, once a breakthrough on Coronavirus is reached, that a rebound in activity could be swift.

Darren Mansfield, partner of commercial research at Knight Frank, said the picture was a continuation of the positive long-term view on growth in UK cities such as Leeds.

He said: “In the marketplace, there is still a willingness to continue transacting but because of

the challenges with conducting due diligence, the velocity of deal flow will inevitably slow down in the months ahead

“However, the market is more balanced than before the global financial crisis. Office vacancy across the UK cities is much lower in 2020 that it was at the onset of the crash.”

Mr Mansfield said that the development pipeline in Yorkshire was much more constrained in 2020 than it was before the last economic crash.

“As at March 2020, there was close to 7m sq ft scheduled for completion across the UK cities between 2020 and 2022,” he said.

“Much of this has already been let with 4m sq ft speculative. Between 2008 and 2010, development completions were close to 14m sq ft meaning market oversupply post crisis is less of a risk today.”

The report added that many major development works in Leeds city centre were continuing during the lockdown, albeit with workers observing social distancing rules.

Eamon Fox, partner and head of department at Knight Frank pointing to the redevelopment of the 66,000 sq ft Majestic building, Town Centre Securities’ 60,000 sq ft 123 Albion Street, building and CEG’s first building at Temple, Globe Point which is 40,000 sq. ft.

“Looking ahead, districts and buildings that have made infrastructure a priority will carry additional favour as firms become more risk averse,” said Mr Frank.

“Because demand has slowed at the same pace as supply, a supply and demand imbalance may not be as pronounced as recorded after previous economic shocks.

“Should an early breakthrough materialise on the COVID-19 crisis, a rebound in activity could be swift.”

However Mr Frank warned that it would be difficult to factor in planning for what will inevitably be a raft of casualties from the business community in Yorkshire and what this will mean for the region’s property sector.

He said: “Establishing a more autonomous business culture was already rising on the corporate agenda long before COVID-19 crisis, albeit trust and infrastructure had previously limited some measures being adopted.

“With these two hurdles now passed, what will the effect be on the shape and scale of

occupational demand in the future?

“However, most people now forced into the current world of digital only interaction will testify to its shortcomings not least the social, creative and collaborative benefits an office provides.

“As such an accentuation of a pre-crisis trend is likely, whereby the form and function of the office shifts towards a hub for collaboration, creativity and innovation rather than as a hub for 9 to 5 processing and administration.”