Financing problems drag on office market

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INVESTORS’ concerns about the state of the economy are damaging the regional office market, according to new research.

Although the Leeds office market had a “positive” six months, thanks to increased activity from large occupiers, there are still problems related to access to finance.

These are the conclusions of a report from property firm CBRE, which found an appetite by larger occupiers for new space in Leeds over the past six months.

Jonathan Shires, director of Office Agency at CBRE in Leeds said; “It is encouraging to see landlords creating refurbished Grade A space which help to fill the predicted shortfall.

“Nevertheless, we are yet to see signs of developers preparing to break ground unless they have a 100 per cent pre-let in place.

“The existing larger stock is leasing well, particularly the larger floorplates in Grade A buildings such as No.1 Leeds which is almost fully under offer.”

The office investment market in the first half of 2012 paints a more challenging picture.

There were just two major deals – 100 Wellington Street, was sold to Bruntwood for £2.5m and Princes Exchange was sold to Credit Suisse for £35.4m.

The report predicts that the second half is unlikely to witness much improvement, although Town Centre Securities recently acquired 6-7 Park Row for around £7m and two sales are being marketed; No.1 The Embankment at £10.25m and St Paul’s House for £14.4M .

Alex Whiting, senior director of Investment at CBRE Leeds, said “We are seeing a lack of demand for offices in Leeds due to concerns over the regional economy. That said, prime well-let opportunities are still attracting interest from UK and overseas funds and private equity syndicates”.

“The reduced levels of investment transactions in the first half look set to continue throughout the whole of 2012.

“Unless debt finance becomes more readily available, we are unlikely to see a significant improvement in the market.”