GVA announces that its latest Big Nine report analysing the office occupier markets of the nine key UK regional cities, reveals that four milestone lettings to the Government Property Unit have lifted take-up to the highest quarterly total on record across the major regional cities during Q3. Average net effective rents reached a record level of £24.62 psf, an increase of 3% over the past 12 months.
Comprising more than a million sq ft of new lettings and representing almost half of city centre take-up for the quarter, the deals in Cardiff, Leeds and Liverpool are the largest in their cities ever and Birmingham's is the largest in a decade. Coupled with the significant GPU deal in Q2 in Edinburgh, these blockbuster lettings mean that total city centre and out-of-town take-up for the year is expected to rival the levels witnessed at the peak of the market in 2015, over 9 million sq ft.
Alongside this, take-up of serviced office space has increased from an average of 85,000 sq ft pa over the past five years to 320,000 sq ft this year, marking a step change in the demand for the sector in the regions. While two deals to WeWork in Manchester amounting to 100,000 sq ft dominate the figures, these are supported by increased activity in Birmingham where Instant Offices has taken 40,000 sq ft in three deals on behalf of HS2 contracts. A similar amount of space has also been taken by veteran serviced office provider Regus to satisfy its expansion plans.
In addition, there continues to be a healthy number of other large deals across the city centres this quarter including 69,000 sq ft to Aberdeen Standard in Edinburgh, as well as two 70,000 sq ft deals to DWP and Clyde & Co in Manchester.
Commenting on the report, Carl Potter at GVA says: “With the GPU deals providing such a boost to activity, it does beg the question how the rest of the market is performing. Underlying demand is proving to be robust, especially in the city centres, although we are also seeing some caution with an increased number of lease regears compared to recent years. Overall take-up this quarter including the GPU deals is 58% above average, while if we remove them it remains 4% above average."
"An increase in serviced office demand has been expected in the regions, following the level of activity witnessed in London. There is an increasing shift in the way occupiers are looking to use space more flexibly as attitudes and technology change, with more co-working space requirements for the expanding knowledge sector as well as more traditional occupiers."