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News Release

London

Signs of growth for UK Office Rents

Incentives begin to harden according to Jones Lang LaSalle’s latest research


London, 4th July 2011 - From detailed analysis of 105 towns and cities in the UK, Jones Lang LaSalle’s latest research shows achievable office rents, the highest rent likely to be achieved in each location, have increased across more markets with 26% of centres monitored showing a year-on-year rise since March 2010.  This compares with just 8% of markets in 2010 which experienced rental growth.  Office rents have stabilised in over half of the property markets analysed including the major regional centres of Leeds and Liverpool where levels have remained unchanged since March 2010. 
 
Jones Lang LaSalle’s 2011 survey shows that  landlord’s incentives have stabilised in around 35% of the markets monitored and in a number of locations have begun to harden, with average rent free periods in Edinburgh, Newcastle, Bristol and Cambridge, amongst others falling.  Despite this, substantial cost savings can still be obtained by occupiers in many regional centres. Year-on-year incentives are currently the most generous for office space in Doncaster, Middlesbrough and Hull. 
 
Jeremy Richards, Director in Jones Lang LaSalle’s National Offices team, said: “There are still significant opportunities for occupiers to obtain cost savings in some parts of the UK. However, the lack of speculative office development, which we are seeing across an increasing number of cities, means that the pipeline will remain severely limited and as Grade A supply reduces further, the window of opportunity for tenants is expected to close.”
 
Jones Lang LaSalle’s survey shows that year-on-year office rental growth since March 2010 was most marked in Glasgow (3.8%), Birmingham (3.6%) and Manchester (1.8%).  In Birmingham, Manchester, Leeds, Edinburgh, Glasgow and the Western Corridor region, Jones Lang LaSalle expects to see an average of 0.7% rental growth in prime offices rents in 2011 however this is likely to be driven by the gradual erosion of Grade A space, rather than a significant bounce-back in occupier demand. 
 
James Finnis, Director in Jones Lang LaSalle National Offices team, added: “Looking at current achievable rental levels, a number of UK regional markets, including Staines, Slough, Uxbridge and Norwich still remain some way below their long term average.  We anticipate, because of this, that these locations could represent opportunities for further potential growth stories over the short term.”
 
Jones Lang LaSalle’s research also shows that in around half of the office markets analysed, rent free periods are 24 months or longer.  The most generous rent free periods can be found in the North West, where averages are around 30 months and the gap between headline achievable and net effective rents remains greatest in Scotland with average incentives in the region of around 24 months rent free. 
 
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Notes to Editors:
 
·         Jones Lang LaSalle’s 2011 survey provides comparisons of the rental levels currently achievable (ERVs) and the incentives on offer in over 100 major towns and cities of England, Wales, Scotland and Northern Ireland.
·         Achievable rental levels provide an indication of market rents in all centres at the end of Quarter 1 2011.  They represent Jones Lang LaSalle’s view of the highest rent likely to be achieved taking into account current quoting rents and other market evidence. However, they can only provide a general guide to comparing rental values.
·         Rental information is based on evidence known or views held in Jones Lang LaSalle and the agents participating in this survey. The rental values of all property types are on the assumption of a letting on an institutional form of lease in new or refurbished office space of over 500 sq m (5,400 sq ft) net completed during the survey period in a prime town centre or campus location (e.g. business parks).