Renewed optimism for demand in UK regional offices according to Jones Lang LaSalle28th February 2013

Although the UK economic recovery remains patchy there is some cause for optimism in the regional offices sector according to Jones Lang LaSalle’s latest Big Six seminar, which took place this morning and covers the markets of Birmingham, Bristol, Edinburgh, Glasgow, Leeds and Manchester.

Commenting on the research findings at the seminar, Jeremy Richards, director in Jones Lang LaSalle’s National Office Agency team, said: “Consumer income is reviving and as a result, regional office employment is expected to pick up from 2014 onwards leading to an increase in demand for office space. Take-up volumes across the Big Six markets totalled 3.2 million sq ft in 2012, up 4 per cent compared to 2011. The total number of deals was also up, however there was a reduction in the number of larger deals with just 53 deals over 10,000 sq ft compared to 57 in 2011. The picture remains mixed however, in terms of office take-up with considerable regional variation. Edinburgh was the strongest performer in 2012, as the only market to witness any City centre pre-letting activity and Grade A take-up volumes up 60 per cent year on year. In contrast Bristol saw Grade A activity fall 80 per cent year on year and a lack of larger deals.”

“Encouragingly we are beginning to see more movement in the way of development activity with a number of schemes already under construction and a number due to start on site in 2013. Our requirements data is also positive. Looking at just the top five requirements in each of the Big Six markets there is a total of 1.7 million sq ft of active enquiries, with an average requirement size of around 60,000 sq ft.”

Simon Merry, director in Jones Lang LaSalle’s National Office Investment team, said: “Investment volumes were down significantly in 2012, but there is expanding market activity in the regions given its relative pricing when compared with London and the South-East and other Cities worldwide.

In 2012, overseas investors accounted for over 60 per cent of all investment transactions and we are increasingly witnessing global money targeting the regions and a strong motivation to buy.”

Mark Wilson, Director of Capital Markets, Jones Lang LaSalle, said: “With prime regional office yields now offering between 250/300 bps margin over other locations within the UK it is anticipated that there will be considerably more UK institutional activity during 2013. Furthermore with encouraging occupational sentiment and attractive running yields we expect demand from property/opportunity funds to be a major influence over the course of the next 12 months. Overseas investors priced out of London and the more expensive European cities are likely to find favour in good quality real estate in the regions, which offers quality covenants in a favourable currency environment.“