Office take-up driven to record high by pre-lets

The take-up volume outside London was 5.9 million sq ft – 35 per cent above the long-run average – according to the research from DTZ.

A sharp increase in pre-letting activity in the regional markets resulted in take-up of 1.2 million sq ft of Grade A space in the first half of the year. Leeds has the second largest volume of Grade A take up behind Birmingham, with notable deals from law firm Addleshaw Goddard and professional services firm PwC pushing overall take-up volume to 213,000 sq ft, 68 per cent above the five-year average.

Take up is absorbing standing stock as well as yet-to-be-completed schemes and, with seven consecutive quarters of above average lettings activity, availability has continued to fall across all grades.

Grade A availability has become critical in some regions, notably Leeds, which has less than five months of Grade A supply left at prevailing take-up rates.

Mark Holmes, a surveyor at DTZ, said: “As anticipated, Q2 delivered strong take-up with long-expected pre-lets to Equifax, Addleshaw Goodard and PwC.

“Grade A supply will continue to dwindle until 2016 when 5 & 6 Wellington Place, Central Square, 3 Sovereign Square and 6 Queen Street will be delivered.

“Grade A rents will edge up to £27-£28 on new grade A product, with refurbishments quoting £24-£25, making the new space look relatively reasonable.”

Nationally, prime rents are forecast to rise by an average of 11 per cent by 2019 as new, higher-quality projects come to market and competition intensifies over suitable available space.

Alex Dunn, senior UK analyst at DTZ, said: “The surge in pre-letting activity has been enabled by an enlarged development pipeline following years of developer inactivity. Eight million sq ft of speculative space is due to be completed by 2019.”