OCCUPIER DEMAND IN REGIONAL OFFICE MARKETS SUSTAINED, DESPITE SHADOW FROM BREXIT
Regional office occupier markets in the first half of 2016 have proven relatively resilient, despite the timing of the UK’s referendum membership of the EU. Across the nine regional city markets monitored by CBRE, overall take-up in the first half of 2016 was 2.67 million sq ft. This is 14% lower than the 3.09m sq ft taken in the same period of 2015, but is 3% up on the average from the first halves of the last five years.
Nevertheless there is significant variation across the UK. Some cities have had a very strong start to the year, whereas other have struggled relative to recent past performance. Cities with improved levels of take-up this year, when compared to 2015, include Bristol, Glasgow and Liverpool. Against each city’s five year average Birmingham, Edinburgh and Southampton can also be added to the list of cities performing above trend over the course of the last six months. In contrast take-up in cities such as Leeds and Manchester has struggled to keep up with the very successful years these cities have seen since 2013 and leasing volumes in Aberdeen remain subdued by the low oil price.
With the timing of the referendum at the very end of the second quarter, it seemed unlikely that we would see the impact of the result on occupational activity in the first half data. Concerns above the referendum itself, ahead of the vote, do not appear to have unduly deterred occupiers from continuing their searches for new space. This is similar to the occupational impact of the Scottish independence referendum in 2014. Indeed for many occupiers, their searches have been initiated due to a forthcoming lease break or expiry.
Requirements continue to circulate, so it remains to be seen the extent to which the Brexit vote will dampen down occupier demand in the regions. However many markets will welcome the timing of the Government Property Unit, who have launched a search for a number of hubs in different UK cities, all of which are very large compared to the typical requirements that drive the regional cities.