Recovery hope after poor year for office market

CB Richard Ellis’s latest Leeds Offices Market View indicates that there could be brighter times ahead for the city’s property professionals.

The four properties with the largest space in the city have all been completed since 2009.

The report highlights the fact that more than 150,000 sq ft is available at Broadgate, while plenty of space is also available at No1 Leeds, The Mint, on Sweet Street, and Toronto Square.

Pent-up demand and the lack of new space suggests that these sites are well placed to secure tenants, the report states.

However, Jonathan Shires, director of office agency at CBRE’s Leeds office, warned that the recovery was going to be gradual.

He added: “While sentiment is undoubtedly improving, this is unlikely to result in a much more active market until the third quarter of 2011.

“Despite an improvement at the smaller end of the market, there is no denying that 2010 was a poor year for take-up of Leeds office stock when only 283,231 sq ft was leased, representing the lowest levels since records began.

“This was almost 30 per cent down on 2009’s take-up of just over 403,000 sq ft, and represents around 50 per cent of the historic 10-year national average.

“The out-of-town market was fairly stable in 2010 with the 243,000 sq ft take-up figure only slightly down on 2009’s 246,000 sq ft.

“As 83 per cent of the 102 total deals in 2010 were sub-5,000 sq ft, availability at the smaller end of the market is now decreasing. Occupiers have been taking advantage of excellent refurbished stock and the good deals on offer for smaller suites within flagship developments.

“If this continues, then headline rents, which worked their way down from £26 per sq ft to around £24 per sq ft last year, will become more robust.

“Incentive packages are also likely to decrease in correlation with reducing stock.”

Alex Whiting, senior director of investment at CBRE Leeds, said; “The general uncertainty over the economy, combined with a continuing lack of availability of debt and limited rental growth prospects means that investor appetite for office investments in Leeds will be restricted.”

According to CBRE, the 2011 office investment market is beginning to mirror that of 2010, when early deals resulted in a strong first half which the second half of the year failed to match.