A recently released report from the firm, ‘Tipping Point”, argues that current Grade A office market trends in cities around the country will lead to a dearth of quality space in the most sought-after locations.
According to GVA’s report, the drying up of supply will start to be felt sooner rather than later unless the scale of speculative office development picks up notably in the months to come.
The report maintains that cities like Manchester and Edinburgh are closing in on a “tipping point” whereby demand for Grade A office space begins to outstrip supply. Bristol, Leeds, and Birmingham are also believed to be in much the same position, with their respective tipping points expected to be reached in 2015 unless supply levels increase considerably.
GVA’s report suggests that in the next few years, huge numbers of businesses around the country will reach the end of their existing tenancy agreements and begin the process of seeking out new offices. The firm insists that a lack of top-quality office space in city centre locations could damage the appeal of the UK as a destination for corporate occupiers.
“It’s no secret that the UK’s Grade A office pipeline is shrinking quickly. However, the scale and repercussions of this event hasn’t appeared to have fully caught on. Our research points to an alarming set of potential circumstances,” said Carl Potter, senior director and head of National Offices at GVA.
A report from CBRE on the performance of the UK’s regional office space markets cited Edinburgh as having performed best overall during 2012. The Scottish capital saw office take-up rates well above average in the first half of the year.
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Editor’s Note: At the end of 2022, the total office space supply in the key regional UK office markets—Aberdeen, Birmingham, Bristol, Cambridge, Cardiff, Edinburgh, Glasgow, Leeds, Manchester, and Oxford—stood at 14.4 million square feet—this was broadly similar to the year before.
However, the total supply of Grade A office space in these markets had decreased to 4.4 million square feet, an 11% decrease from the previous year.
This is due to development project starts decreasing during the pandemic, and also the increased building costs caused by supply chain issues, following the pandemic, meaning that less Grade A space came to the markets.
It is also due to the flight to quality by office tenants, who are seeking high-quality office space to continue to entice employees back to the office and help recruit new employees.
Additionally, businesses are seeking energy-efficient space due to rising utility costs due to the Russo-Ukrainian war and that also has good ESG credentials.
This sort of office space is found in the Grade-A stock.