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News Release


2011 UK regional office market take-up set to be in line with last year’s levels

Increased speculative development activity in Q3 witnessed in Cardiff, Glasgow and Leeds

London, 3rd November 2011 – Activity levels across the UK’s regional office market is heading towards a year of ‘much the same as the last ’ with aggregate take-up levels for the first nine months of 2011 indicating that year-end totals will be similar to 2010 levels according to new research by property consultants Jones Lang LaSalle.

Across the eight key markets of Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Manchester and the Western Corridor region monitored by Jones Lang LaSalle combined office take-up totalled over 1.5 million sq ft in the third quarter of 2011 (Q3 2011).  This reflected an increase of 22.9 percent compared to the previous quarter (Q2 2011) however volumes were down by -36.3 percent compared to the equivalent period last year (Q3 2010).  The economic frailties, which have been evident over recent months, have not yet been reflected in regional office take-up volumes. 

Chris Hiatt, Chairman, National Office Agency at Jones Lang LaSalle said: “Overall leasing activity across the eight regional office markets in Q3 2011 was boosted by a number of larger deals in the Western Corridor region including the acquisition of circa 100,000 sq ft by Astellas Pharmaceuticals at Hillswood Drive, Chertsey.  In contrast, Bristol city centre saw no office leasing activity over 10,000 sq ft to be concluded.  Given the mixed outlook for the economy, occupiers are expected to remain cautious over the medium term.”

In response to the impending supply shortage a number of new speculative starts were witnessed in Q3 2011. Currently there is just over 1.0 million sq ft of space under construction speculatively across the eight key UK regional markets which reflect an increase of 14 percent compared with the previous quarter. This was driven by increased development activity with a number of new starts in Glasgow, Cardiff and Leeds underpinned in part by pre-lets.

Average vacancy rates fell slightly across the eight UK regional markets, down from 12.6 percent in Q2 2011, to 12.3 percent in the third quarter.  The picture, however, remained mixed with overall supply continuing to increase in Birmingham, Glasgow and Bristol. 

Chris Hiatt added: “Further erosion of Grade A supply was witnessed in Quarter 3 with Grade A vacancy rates falling to just 4.0 percent, down from 4.3 percent in the previous quarter.  However, there remains considerable variation across the regions with Grade A vacancy rates as low as 2.1 percent in Manchester.  

“With real estate, which typically accounts for 7-12% of a business’ total operating cost base, cost control has remained a consistent theme for occupiers over the last 12 months,. This will continue to impact on real estate decision making and occupiers will continue to seek efficiency savings in the market.”

Prime rents increased quarter- on-quarter in Manchester and the Western Corridor, by 5.3 percent and 1.4 percent respectively, driven largely by the lack of suitable Grade A supply. In contrast, Edinburgh experienced slight rental softening as take-up activity continued to fall.  Elsewhere rents remained stable over the third quarter.  Prime rents remain heavily supported by incentives with up to 30 months rent free achievable in most locations.  On aggregate UK regional rents have increased by 1.7 percent compared to the equivalent period last year.

In the regional office investment market, city centre office investment volumes across the eight regional markets totalled over £450 million in Q3, an increase of 21 percent compared to the equivalent period last year (Q3 2010).  Prime yields remained stable in the majority of markets, however Q3 witnessed a slight outward movement of 25 basis points in Glasgow and Leeds to 6.25 percent however investors have continued to focus primarily on Central London and the South East markets.