Commercial property analysts at DTZ said that overall office renting activity in the regions fell to long-term average levels in the third quarter of 2011, having been boosted by several large-scale deals in Q2.
Manchester and Glasgow, two of the UK’s larger cities outside London, both saw a decline in office rental activity in their central business districts during the third quarter but a rise in take-up in out-of-town locations.
Newcastle, the most populous city in the north-east of England, was singled out as having the best performing office space market in the period, thanks in part to a deal that saw the broadcaster BSkyB sign-up to occupy 37,000 sqft in the heart of the city.
Stand-out office renting deals in Manchester in Q3 involved the oil major Shell and the airline Etihad, while business parks on the outskirts of Glasgow attracted a number of engineering and renewable energy operators.
The amount of Grade A office space available to rent in UK locations outside of London declined in the three months to the end of September but overall availability “crept up”, DTZ said.
Analysts looking at current market conditions in the regions concluded that while landlords could find it tough to attract new tenants, there are opportunities for incumbent occupants to strike a good deal when their leasing terms are up for renewal.
“Sentiment remains fragile, given the uncertain economic outlook for the UK. This has led to extended decision-making procedures for the larger corporates,” said Martin Davis, head of UK research at DTZ.
“Most demand continues to come from smaller, indigenous professional firms that are occupying space at an increasing density and keen to relocate. These smaller firms are able to make occupational decisions more readily and are taking the opportunity to upgrade.”
Editor’s notes: The largest UK office market outside of London is Manchester and, in 2022, the take-up of office space in the Northwest city by way of office lettings deals totalled 1.2 million square feet which was ahead of the 2021 total and in line with the 10-year average.
The largest deal in Manchester in 2022, was the 130,000 square feet acquired by the Government Property Agency (GPA) at First Street.
In terms of the other five markets within the Big 6 Regional Office Markets, Birmingham’s figure for 2022 was 692,700 square feet. This was ahead of the 2021 annual figure and also the 5-year average and 7% below the 10-year average.
The largest office deal in Birmingham in 2022 was Goldman Sachs’ acquisition of 110,000 square feet at One Centenary Way.
Bristol’s take-up figure was 620,200 square feet in 2022 which was just above the 10-year annual average of 612,700 square feet.
The largest office space deal in Bristol in 2022 was Paymentsense’s pre-let of 54,767 square feet at EQ.
660,700 square feet of office space was let in Edinburgh in 2022 which was below 2021’s figure and the 10-year average. However, a large number of lease renewals and re-gears took place which was thought to explain the reason why many tenants chose not to sign for new space.
The largest deal of the year was BlackRock leasing 139,172 square feet at 20 Brandon Street.
Glasgow saw 409,200 square feet transacted in the year which was approximately 40% below the 10-year annual average of 671,400 sq ft.
The largest office deal in Glasgow in 2022 was the renting of 33,905 square feet at Cadworks by OVO Energy.
618,200 square feet of Leeds office space was taken up over the year which was just below the 645,500 square feet 10-year average.
The largest deal in Leeds in 2022 was the leasing of 54,545 square feet at 1 Trevelyan Square by Leeds Trinity University.
However, in July 2023, record office rents were paid at Relentless Development’s St Michael’s.
Pinsent Masons and Hill Dickinson signed 10-year leases for a combined 45,000 square feet and it was understood that both firms paid around £43 per square foot for their spaces.
Pinsent Masons would relocate from 3 Hardman Street into 27,000 square feet across floors 7 and 8 of the development off Jacksons Row, on completion.
And, Hill Dickinson would move from Fountain Street to 18,000 square feet on the top floor of the nine-storey block.
Prime office space in Birmingham reached £41 per square foot per year and in Bristol city, headline rents reached £42.50 per square foot.
Premium office space in Edinburgh reached £39.50 per square foot and, in Glasgow, office space of the highest quality was quoted at £35.50 per square foot. And, prime office space in Leeds reached £36.00 per square foot.
Newcastle is a growing office space market and is becoming increasingly recognised as a tech hub. Large law firms are renting space in the northeast city and HMRC made a large pre-let commitment in 2021.
In 2022, the total office space take-up of space in Newcastle totalled 239,410 square feet and headline rents reached £28 per sqft per annum.
One of the largest deals in 2022 was law firm Clifford Chance’s acquisition of 15,182 square feet at The Lumen.
DAC Beachcroft took 14,542 square feet at Bank House and Hay & Kilner took 14,451 square feet at The Lumen.
Although these were overshadowed by the aforementioned HMRC’s pre-let commitment to 463,000 square feet at Pilgrim’s Quarter in 2021.