REGIONAL CITY OFFICE MARKETS TO REMAIN BUOYANT IN 2018
After enjoying a record breaking year of office space take-up, the prospects for the UK regions are still buoyant
Global real estate advisor has published its UK Office Market Property Perspective report, revealing a remarkably robust outlook for UK regional cities.
After a solid though unspectacular start to the year, regional office occupier markets excelled in the second half of 2017. Across the ten regional city markets monitored by CBRE, overall take-up in H2 2017 reached 4.1 million sq ft and climbed to a record breaking 6.9 million sq ft for the full year.
The majority of cities in 2017 were either marginally above or significantly ahead of their five-year average. In particular, there were four stand out cities, that each surpassed one million sq ft of take-up in 2017, namely: Birmingham, Edinburgh, Leeds and Manchester.
Many markets benefitted from sizable Government Property Unit (GPU) and HM Revenue and Customs requirements which contributed to these record levels of take-up in some cities. But the private sector was also very active as well. For instance, the UK’s flexible office space operators significantly expanded their presence beyond London in 2017, into the South East and regional cities such as Birmingham and Manchester. a trend that will continue into 2018.
The prospects for UK regional office markets in 2018 will inevitably be linked to the slowing national economy and the terms of the ever-closer Brexit deal. Another key challenge facing many regional cities (such as Bristol, Edinburgh, Glasgow, Birmingham and Manchester) is their undersupply of Grade A office space. Development activity slowed in the aftermath of the EU referendum result. Although a number of new developments or high-quality refurbishments are underway or about to commence they will take time to complete. These cities will experience a hiatus of quality supply shortage in the meantime and this dynamic will drive pre-let activity.
Overall, we expect the negatives to be balanced by the positives in 2018. There are also reasons to anticipate a year of further buoyancy. The public sector will continue to account for a significant share of office space demand as there are still some outstanding GPU requirements to be satisfied – notably in Manchester and Glasgow where deals are yet to be agreed. Positively, there are also a number of other large requirements for office space circling the regions and CBRE expect demand from smaller occupiers to continue at a steady rate from a broad sector base.