Leeds office market remained “incredibly resilient” during 2018

Leeds office occupier market resilient despite EU referendum
Credit: Shutterstock.com/ Marina J

Lamert Smith Hampton’s latest Leeds Office Market Pulse, which provides investors, occupiers and developers with detailed insight across the city centre and out-of-town office markets, reveals that the total annual take-up across Leeds exceeded the 10-year average by 23% during 2018.

While the total take-up figure of 1,062,811 sq ft was down 27% year-on-year, 2017’s activity was somewhat distorted by the 378,000 sq ft Government hub letting at Wellington Place.

Looking at the sub-markets in more detail, the data shows that occupier take-up in Leeds city centre reached 196,252 sq ft in Q4 2018, bringing the final year total to 663,229 sq ft, which is in line with the five-year average of 667,081 sq ft and 18% above the 10-year average of 560,932 sq ft. A total of 34 deals were transacted during the final quarter, including Equifax’s 11,292 sq ft expansion at 1 Wellington Place and Orega’s letting of 11,160 sq ft at St Pauls House which once will provide flexible serviced office aimed at the city’s rapidly growing SME sector.

The out-of-town market also witnessed a stellar performance with a Q4 take-up figure of 61,673 sq ft bringing the final year total to 399,582 sq ft, a 19% increase on 2017. A total of 21 deals were transacted during the final quarter of 2018, the largest of which being Pharmacy2U’s 15,767 sq ft pre-let at Lumina, Thorpe Park. Out-of-town rents have also moved on significantly driven by a combination of strong demand and a lack of good quality space.

Across the whole city, there was only one deal over 20,000 sq ft completed during the final quarter of 2018, reflecting the reduced volume of corporate transactional activity witnessed during 2017. However, picking up some of the slack is the Technology, Media and Telecommunications (TMT) sector, which accounted for 24% of total demand in the three months to December 2018.

Grade A supply across the city centre and out-of-town markets remains extremely tight at 348,214 sq ft combined. With only 258,307 sq ft under construction in the city centre, the situation looks set to worsen in the short-medium term.

Adam Varley, Director of Office Advisory in Leeds, said: “Despite a marked reduction in larger corporate transactions, the Leeds office market remained incredibly resilient during 2018. And, while the on-going political uncertainty clearly makes the decision making process challenging for businesses looking to make relocation decisions, the reality is that the occupational office markets are affected more by the distinct lack of supply than macro-economic factors.

“With current grade A supply levels remaining constrained, 2019 could be a challenging year for the performance of the Leeds office market.”