Leeds prime offices head to £40 per sq ft mark
Consultancy Knight Frank said that with grade A offices now fetching £38 per sq ft in the city, the £40 target could be reached in the second quarter of 2024.
In Knight Frank’s new UK Cities report, published this week, the firm says that city centre rents have increased by 6% over the past 12 months.
Notably, prime office rents have risen by 19 per cent since the onset of the Covid pandemic, the second largest increase seen across the Big Six regional cities.
Eamon Fox, partner and head of development at the Leeds office of Knight Frank, said: “With strong occupier demand and supply-squeezed market, forecasts indicate that prime rents will reach £40 per sq ft by the Q2 of 2024.
“We have several transactions agreed and progressing through legals at £39 psf, with £40 psf being the next milestone. The market is such that transactions are no longer rent-sensitive, but amenity and quality is scrutinised more than ever by our occupier customers. When we get this right, we see growth in rents”.
Fox continued: “Leeds experienced strong occupier demand in 2023, with the city registering the highest level of annual take-up since 2019. Total take-up during the year was at 651,461 sq ft, 10% above the five-year annual average and a 9% year-on-year increase.
During 2023, the number of deals rose slightly from the previous year to 127 completed, 17% above the five-year annual average. Fox said. Grade A deals accounted for around 74% of deals, echoing the figures released by the Leeds Office Agents Forum last month.
“With above average levels of take-up in 2023, demand for best-quality space was strong, accounting for 74 per cent of annual take-up,” said Mr Fox.
The largest letting of the year was to Lloyds Banking Group, which took 124,400 sq ft of grade A space at 11 & 12 Wellington Place in Q1. This was the largest occupier deal to be completed across all of the major UK regional cities last year.
Occupier demand remains strong, said Eamon Fox. Credit: Robert Beaumont
The availability of Grade A space stood at 176,286 sq ft at 2023 year-end, 66% lower than the previous year and 34% below the 10-year average for Leeds. The level of grade A supply at the end of 2023 is the lowest since 2019, illustrating the ongoing supply squeeze in the office market.
At year end, 581,984 sq ft of office stock was under construction with delivery due this year. Of this, 295,939 sq ft is speculative. Comprising five schemes, 232,688 sq ft is new build, while the remaining 63,251 sq ft is undergoing comprehensive refurbishment. Most of the speculative space is expected to complete in the coming weeks.
Meanwhile, owing to macroeconomic and geopolitical instability, investment volumes were subdued in 2023, finalising at £80.4m, 65% short of the 10-year annual average.
The largest investment deal was the sale of the BT Building, One Sovereign Square to Citi Private Bank for £38.5m. Overseas investors accounted for the greatest share of annual investment turnover, at 56%, owing largely to the above deal, and with capital coming from both the Middle East and South Africa.
According to the UK Cities report, the strong occupier market will mean that investors remain largely bullish on Leeds offices.
The full UK Cities 2024 report can be accessed online.
