Demand for office space across Sheffield remains subdued following the vote to leave the EU referendum, a consultancy firm has claimed.
Research from national commercial property consultancy Lambert Smith Hampton (LSH) has highlighted that, although office demand across Sheffield remains flat as a result of Brexit, owner occupiers are seeing value in its out-of-town market.
The latest edition of the company’s Sheffield Office Market Pulse report, which provides its investor, developer and occupier clients with a detailed insight across the city, found that activity in the city centre improved in Q3 with a total of 17,750 sq ft.
However, it was the out-of-town market that accounted for the lion’s share of take-up for the second quarter running, at 26,974 sq ft.
And, looking ahead to the final quarter of 2016, the report’s authors anticipated a stronger finish to the year with occupiers making up for lost time in the uncertain times that ensued post-Brexit. Total take-up across the city centre and out-of-town markets combined amounted to 44,724 sq ft – a 32 per cent increase on the previous quarter – but a fall of 50 per cent on the same period last year.
Despite the slight increase in new lettings, office take-up in the region still remains below the five-year quarterly average. Office supply across the city centre and out-of-town markets has remained constant during Q3. Despite the relative slump, the report anticipates a pick-up in city centre demand during 2017 as large-scale high specification projects come to market.
Sheffield’s grade A office supply is expected to be boosted by the completion of Sheffield Digital Campus and the £5m refurbishment of Steel City House, which will inject over 180,000 sq ft of high-quality office accommodation. The latter project, taking place in the city’s old telephone exchange building, is a massive redevelopment project which has seen the entire building gutted and the creation of a series of innovative steel bridges across the complex, and will feature a glass paneled section on a newly-created sixth floor.
The completion of these two schemes next year is expected to close the gap between A and B grade rents. Out-of-town, the continued steady take-up and lack of new speculative development has caused a shortage of stock, with areas such as Meadowhall and Don Valley proving to be highly popular locations.
The report also alluded to a rebound in total office investment volume across Sheffield in quarter three of the year, with Trinova Real Estate’s acquisition of Vulcan House Steel for £30.95m proving that the yield differential between other cities in the Northern Powerhouse still proves an attractive hunting ground for investors.
“The appetite to acquire in Sheffield remains strong but a very limited stock supply means opportunities are few and far between, restricting the level of transactional activity,” it said.
Tom Burlaga, senior surveyor at LSH Sheffield, said: “It is clear that we are seeing improvements in Sheffield’s office market following a difficult second quarter as a result of the EU Referendum.
“The out-of-town market has proved more popular, with owner occupiers taking advantage of depressed capital values, however, we are anticipating a stronger finish to the year in both markets, with occupiers making up for lost time.”