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Lively UK regional office markets in first half of 2018

by | Aug 8, 2018

CBRE’s UK Offices Property Perspective shows business confidence is running high in the UK regional cities regardless of any Brexit related uncertainty. This is being reflected in strong occupational demand for offices.

Across the ten regional cities monitored by CBRE, analysis shows that overall take-up reached nearly 3.6m sq ft in H1 2018 This was 11% above the five-year average and 26% higher than the 2.8m sq ft acquired in the same period of 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 outperformed against their five-year average. These were:  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. Bristol, Birmingham, Glasgow, and the wider South East were the most notable expansion locations in H1. Bristol witnessed a significant 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 South East of England, 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, so we expect to see more activity from this sector in H2.

Following a record year of take-up in 2017, the public sector has continued to play a significant role in regional office space demand in H1 2018, taking just over 0.9 million sq ft. HM Revenue & Customs accounted for the three largest transactions, ranging between 157,000 and 270,000 sq ft in Manchester, Glasgow and Liverpool.  There may be more to come from this sector in H2. Indeed, it has been reported that Slough Council has just completed acquisition of 111,000 sq ft in the town centre for use  as a major council office and civic headquarters building.

 

Strong requirement levels continue to circulate the regional cities. One example is Barclays, who have announced plans to develop a new campus at Buchanan Wharf, Glasgow. But a severe supply shortage of good quality office space could be a brake on activity in some markets. 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.

 

The UK regional cities are thriving.  They currently benefit from a combination of economic recovery, political focus, transport infrastructure expansion (Heathrow, Crossrail and HS2)  and international investment. More widely surveys of business confidence are presenting an upbeat message for many parts of the UK. Lots to feel cheerful about.

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