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JLL looks into its property crystal ball for 2015
Leeds, 21 January 2015 - YORKSHIRE looks set to become one of the property winners of 2015 as more investors look beyond London and the South East, according to property agents JLL.
Preliminary investment volume figures compiled by JLL reveal that Yorkshire had a bumper 2014, with around £1.4bn of commercial property investment transacted. The property agent predicts that activity in Yorkshire will be strong again this year.
Andrew Summersgill, director in JLL’s Investment team, said: “We have seen a boom in investment volumes over the last couple of years and anticipate another healthy year in the Yorkshire property market although we are unlikely to repeat the same levels as 2014. One reason for this is the political uncertainty around the May election, which is the hardest to call in living memory and may lead to a pause in market activity.”
JLL also predicts that there is likely to be increasing activity in the secondary property market, which may become more attractive, given the yield gap between it and the prime market.
Andrew Summersgill continued: “With the weight of money there is a strong story for some further yield compression however the momentum will not be maintained. Total property returns in 2015 are as likely to be driven by rental performance as yield shift which makes the supply/demand and dynamics of the occupational market just as important to investors.” The Leeds market has historically been “feast or famine” in terms of the construction of new offices, according to JLL. Richard Thornton, director in JLL’s Office Agency team, points to the unprecedented level of speculative office development activity currently underway in the city whilst maintaining that there is still a strong business case for bringing more space to the market in 2017/18. Richard Thornton said: “Currently, there is around 455,000 sq ft of pure speculative development on site in Leeds city centre. Of this, some 160,000 sq ft is already spoken for with ongoing pre-lets/negotiations resulting in circa 300,000 sq ft of grade A space coming on stream by mid-2016. With current take-up levels this space will let within 12 months of practical completion, if not earlier, so there is a case for developers to bring more speculative space to the market within the next two years.”
Lack of supply is already leading to reduced incentives in the regional markets and JLL predicts that over 2015 there will be a return to headline rental growth in Leeds with office rents likely to break through the £27 per sq ft barrier. Upcoming lease events will fuel demand from corporates which combined with demand from the professional sector means JLL is predicting city centre take-up to certainly exceed volumes transacted in 2014. Jeff Pearey, JLL’s lead director in North East, concluded: “We are predicting another strong year for investment in the region, rental increases in the office, industrial and retail markets and hopefully for Leeds to finally see its first PRS scheme in 2015. “The Leeds City Region LEP is really starting to motor and combined with the movement for devolution in the region we all have our part to play in what looks set to be a very positive outlook for our region.”
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