• Surge in flexible office take-up

• Public sector deals accounted for 0.9m sq ft

UK regional office occupier markets in the first half of 2018 were lively with few signs of Brexit-related uncertainty. Across the ten regional cities monitored by CBRE, a provisional analysis shows that overall take-up reached nearly 3.6m sq. ft. This level is 11% above the five-year average and 26% higher than the 2.8m sq. ft. acquired in the same period during 2017.

Although there were variations across the UK, the majority of markets witnessed a very strong start to the year. Six of the ten cities monitored by CBRE outperformed against their five-year average. These include: Belfast, Edinburgh, Glasgow, Leeds, Liverpool and Manchester. Others such as Birmingham and Bristol also saw healthy levels of occupier activity, albeit at slightly below their five-year average.

The UK’s flexible office space operators continued to expand in the first half of the year. Bristol, Birmingham, Glasgow, and the wider South East were stand out expansion locations Bristol witnessed a notable increase in demand from this sector with a key deal to Runway East (30,000 sq. ft.). In Birmingham, deals were concluded with BE Group, Instant, iHub, Regus and Orega, whilst in Glasgow there were prominent transactions to Orega and Regus. In the wider South East, flexible office space providers took nearly 200,000 sq. ft. with Slough and Reading the most popular locations. Runway East and other operators also have live requirements in all the regional cities, and are expected to see more activity from flexile space operators in H2.

Following a record year of take-up in 2017, the public sector continued to play a significant role in regional office space demand in H1 2018 (just over 0.9 million sq. ft.). HM Revenue & Customs accounted for the three largest transactions ranging between 157,000 – 270,000 sq. ft. in Manchester, Glasgow and Liverpool.

Strong requirement levels continue to circulate the regional cities. The only potential brake on short-term activity in some markets is a severe supply shortage of good quality office space. Grade A space constraints are an ongoing issue in cities such as Bristol, Edinburgh and Glasgow where the development pipeline has not kept pace with demand. These shortages will drive further pre-let and refurbishment activity.

 Emma Jackson, Associate Director of Research for National Office Markets
Confidence is running high in the UK regional cities.  They are thriving on a combination of economic recovery, political focus, transport infrastructure improvements and international investment. Wider surveys of business confidence are presenting an upbeat message for many parts of the UK, and we are seeing this reflected in occupational demand.
Emma Jackson, Associate Director of Research for National Office Markets
Andrew Marston, CBRE National Research Director
The market data for the first half makes it clear that the age of flexible occupation is firmly making its presence felt in cities across the country. Research conducted earlier this year by CBRE amongst UK landlords highlighted that flexible space operations were about to hit the mainstream. The near universality of demand from this sector confirms that this view was well observed, and we have every expectation that the sector will form a significant share of take-up by the end of 2018.
Andrew Marston, CBRE National Research Director