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News Release

Leeds

Subdued office leasing conditions, but smaller lettings relatively unaffected in Leeds

According to Jones Lang LaSalle’s latest Leeds Offices Research Report


Leeds, 28th July 2009Office leasing activity in Leeds city centre in Quarter 2 2009 continued to be generated primarily by market churn with no lettings over 10,000 sq ft.  Although it has fallen slightly, take-up of office space below this threshold remained broadly in line with the previous five quarters according to Jones Lang LaSalle’s latest Leeds Offices Update - Quarter 2 2009. 

Jeff Pearey, head of Jones Lang LaSalle’s Leeds office, said: “The continued uncertainty in the economy was reflected in sustained occupier caution during Quarter 2, resulting in low levels of office leasing activity. Undoubtedly a lack of larger deals is clearly affecting the market.

“With landlords under increasing pressure to secure income streams and occupiers seeking to avoid the capital expenditure associated with a move, there has been a rise in lease renewal and lease re-gearing activity, meaning more occupiers are choosing to stay put with the inevitable negative impact on take-up volumes.”

According to Jones Lang LaSalle demand for office space fell over Quarter 2, with only 128,500 sq ft of new enquiries brought to the market, which was 40% less than the five-year quarterly average. Office leasing activity throughout the remainder of 2009 is likely to be driven by the Public sector, which controls an increasing proportion of occupier demand.  Demand from all other sectors is anticipated to remain low and with total office take-up forecasted to be in the region of 350,000 sq ft this year.

Jeff Pearey added: “Falling levels of demand have also been reflected in viewings figures, which dropped 28% in Quarter 2 in comparison with Quarter 1 2009.  We expect occupier demand to continue to be low over the remainder of the year and any requirements that are in the market will take longer to be satisfied as occupiers defer property decisions.”

With no new space under construction in Leeds city centre at quarter end, Jones Lang LaSalle does not expect any further significant rises in vacancy rates, presently circa.12.9%, by the end of the year.  Work is scheduled to get underway shortly at the refurbishment of 40,000 sq ft Crusader House, which will complete towards the end of 2010.  With this exception, however, there is no space due to complete next year. Consequently, Grade A supply will start to tighten with the market likely revert to a shortage of Grade A space during 2011.

Jeff Pearey concluded: “As yet the headline rent of £26 per sq ft on a large tranche of space, has not been tested but we expect aggressive financial deals to be offered by landlords over the next six months, due to increased pressure to secure income and cover empty rates costs.  To some extent, headline rents will be supported by incentives but these will vary considerably between deals, dependent upon lease length, tenant covenant and building location. Overall, we forecast a peak to trough fall of around 10% in prime rents between now and the end of 2010, before stabilising during 2011.”