RISING rents, further pre-letting activity and at least one new speculative office scheme building will dominate the Yorkshire office market in 2014, according to property experts across the region.
With business growth back on the agenda, particularly for professional services firms, the need to move offices has become more urgent for some.
Eamon Fox, associate director in DTZ’s office agency team in Leeds, predicts 2014 will be a “headline grabbing year” for the city.
“We believe that the low point in the market and consequent maximisation of incentives available in the current property cycle has now passed,” he said. “It is our view that rental levels will begin to stabilise and grow steadily during the period Q1 2014 onwards.”
But Jonathan Shires, director of office agency at CBRE in Leeds, believes the main question will be ‘where will all the occupiers go?’ as demand continues to outstrip supply.
According to CBRE, there are currently a number of companies seeking offices over 30,000 sq ft but only one building – the former Cobbetts space at Whitehall Riverside – has this amount of available space in Leeds.
Mr Shires said: “With funding still challenging for most and no new speculative build opportunities on site, the market will have to look to either the pre-let market or the high quality refurbishment market to satisfy these large requirements.”
A key refurbishment scheme yet to be moved forwards is Bruntwood’s City House which CBRE believes will be a much-needed addition to the mix. Mr Shires said: “(It) would act as a further beacon of success for the city and could also help unlock the railway station upgrade.”
Alex Duckett, associate at Knight Frank in Leeds, added: “Inevitably, take-up statistics are likely to compare negatively to 2013, due to the lack of available stock and a frenzied past 12 months, but deals will be done as the West Yorkshire property market recovers and prospers in line with the UK economy.”
Meanwhile, the fortunes of Sheffield’s city centre office market depend on what decision is made in relation to the proposed new retail quarter, according to Rob Darrington, a partner at Sheffield-based Commercial Property Partners.
“Although the actual number of deals is increasing, the region has lacked any significant-sized deals, which are needed to ensure take-up figures reach the levels they were pre-downturn,” he said.
“The conversion of offices to residential will slow down, while Sheffield will see its first office development (3, St Paul’s Place) start since 2008.
“The fortunes of Sheffield’s city centre office depend heavily on what decision is made in relation to the proposed new retail quarter.”
In Hull, confidence is improving following the 2017 City of Culture announcement and the recent planning permission granted for the £450m Able Marine Energy Park on the Humber.
Dominic Gibbons, managing director of developer Wykeland, said: “It’s all about levels of business confidence and confidence is better now than 12 months ago.
“Enquiries have been growing at our three business parks. The conversion of enquiries into transactions will be a big focus for us in 2014.
“We are also looking to speculatively build a bit more. The downside is that construction costs are also increasing.”
Leeds’s investment market is struggling with a shortage of prime, quality stock to satisfy the appetite of investors, according to Robin Bullas, CBRE’s associate director of capital markets.
“As we move into 2014 we expect to see continued demand from UK and overseas investors as well as UK property companies with foreign equity partners,” he said.
He added: “Prospects into 2014 are positive for both prime and secondary assets. With London and the South East proving expensive, Manchester and Birmingham have already seen increased investor demand and investors are now starting to focus on Leeds.
“We expect yields to harden for both prime and secondary assets in response to increased investor demand and a shortage of supply.”
Mr Darrington predicts that speculative development will return to well-located industrial sites in South Yorkshire towards the end of 2014 as supply decreases.
“There will be continued demand from large retailers for large distribution sheds, but demand will diminish for tertiary stock,” he said.