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JLL Big 6 2014: Economic Updates

Economic Update

​​Ben Burston, Head of UK Offices Research

  • The UK economic recovery will feature stronger business investment and exports in 2014, with less reliance on consumer spending
  • We predict strong growth outlook for all Big Six cities
  • Employment growth is strong but not across all sectors
  • Cities with strong knowledge-based economies will benefit – Bristol, Edinburgh and Leeds

Urban Tendency and Big Six Occupational Markets

Jeremy Richards, Director – National Offices

  • A key market feature is Urban Tendency - the increasing preference of businesses to locate in city centres. However some business parks will continue to thrive.
  • Leasing volumes in 2013 exceeded five and ten year average and the number of deals over 10,000 sq ft rose significantly.
  • Changes to permitted development rights mean 1.4 m sq ft is being developed for apartments; which will help reduce obsolete stock, but will be a squeeze on rents and availability
  • We predict occupier demand will strengthen and further speculative development will occur (2014 - 850,000 sq ft is being delivered across seven schemes)

Leeds, Manchester and Birmingham

Jeff Pearey Director – National Offices

  • Major Legal, Professional and Corporate transactions in each city have underpinned strong occupier markets in 2013
  • Typically supply levels in each of these cities are now under pressure; this is being addressed in some locations but not all
  • Substantial infrastructure projects in Birmingham and Manchester are underway, which will improve each city’s ability to attract investors
  • Leeds welcomed the opening of Land Securities’ Trinity Shopping centre and the Arena in 2013 to improve its overall occupier offer

Edinburgh and Glasgow

Cameron Stott Director – National Offices

  • Edinburgh has enjoyed the highest level of take up since 2007, albeit Grade A take up was down on 2012
  • Notable activity came from the resurgent financial sector although there were also healthy levels of activity in the technology sector
  • Glasgow secured the largest letting in the Big 6 and has the most amount of speculative space under construction with 3 schemes starting in 2013
  • The Commonwealth Games and MTV awards will create further buzz around the city in 2014
  • Speculative development is a key feature of the market

Big Six Investment Markets

Angus Minford, Director – Capital Markets

  • Market recovery has taken hold - investor demand has spread from London to the South East and beyond to the core regional cities
  • The sheer weight of money now targeting the Western Corridor and prime regional cities has driven yields inwards in most locations over the course of 2013
  • We expect yields to become keener over the course of 2014 in light of continued strong competition, increased appetite for risk and stock creation
  • The sources of capital now targeting regional offices are increasingly more varied

Big Six Investment Markets

Simon Merry, Director – Capital Markets

  • There has been a 250% increase in transaction volumes between 2012 and 2013
  • The largest number of transactions was in Bristol
  • The differential between prime regional and West End/City of London still remains significantly above its long term average. With improved rental growth confidence this differential will narrow