Speculative development has tentatively begun in the city with construction starting at MEPC’s No 6 Wellington Place in June but Jonathan Shires, CBRE’s senior director of office agency in Leeds, said more commitment was needed from developers.
Speaking to 120 delegates at CBRE’s Leeds Market Insight Briefing yesterday, for which the Yorkshire Post was media partner, Mr Shires said out of seven major UK regional cities, Leeds had the second lowest supply of grade A office space in the UK, behind Aberdeen.
There is currently 274,000 sq ft of available grade A office space spread across 15 buildings in the city.
Mr Shires said: “We have got very little grade A supply in the city, which is a great shame because over the last 18 months 30 per cent of office take up by square footage has been from new companies investing into Leeds. They will usually only do that on a footloose basis. They decide six months before and if you don’t have that space they will look elsewhere.”
He added: “If that happens, we won’t get new growth in the city and we’ll go back to having a handful of people coming in over a five-year period.
“Hopefully developers and the investment market are aligned and we’ll see some more builds take places soon.”
Over the next five years, office rents in Leeds are expected to rise 2.1 per cent. Rent for new office space is currently about £25.50 per sq ft or £24.50 per sq ft for refurbished space.
Andrew Marston, CBRE’s national research director, said: “New development activity will set new rental levels in regional markets. We have the strongest rental growth forecasts we’ve had for some time.”
Meanwhile, the aggressive expansion of budget retailers like Aldi and Lidl is expected to lead the demand for new distribution space across the UK over the next few years.
Mr Marston said 2014 had seen the start of the first genuine speculative industrial development since 2009.
He added: “The majority of this activity started around the M25 and spread to the Midlands but it is now spreading north and into Yorkshire.”
Last month, Muse Developments announced it was starting on site at its 110-acre manufacturing and distribution development at Logic Leeds in the Aire Valley enterprise zone with a new 80,000 sq ft industrial unit.
“This is a pattern we will continue to see - this dispersion of activity from the South East to the North and west,” said Mr Marston.