By Simon Creasey and Richard Hook

New benchmark set as global firms compete for office space in Leeds

With rents on grade-A city centre office space slowly nudging northwards since 2014, Leeds office agents have been waiting with bated breath to see a new benchmark set for headline rents in the city.

They have not been disappointed. Within the past six months they have seen two new headline rents registered. In the final quarter of last year, BDO took just shy of 13,000 sq ft at Marrico’s Central Square scheme for a rumoured £27.50/sq ft and earlier this year, that mark was topped by fashion brand Burberry at 6 Queen Street, which took a reported 46,000 sq ft at a new milestone of £30/sq ft. It is rumoured that a second deal on city centre office space at that same rental level is currently under offer.

The recent surge is down to a number of factors, according to Paul Fairhurst, head of Savills Leeds. “The investment in delivering good-quality office space and improving the fabric of the city has resulted in high-profile and exciting companies vying for space in Leeds,” he says.

“Leeds is firmly on the radar of major global occupiers, as shown by Google’s creation of The Digital Garage at Leeds Dock and Sky’s expansion from 40 to around 650 employees in the city since 2015. Burberry’s decision to relocate hundreds of jobs to Leeds further underlines this.”

This increased competition for space has also been reflected in rents for secondary stock. “Refurbished offices have shown steady growth, with top rents rising 23% over the past five years, from £22/sq ft in 2012 to £27/sq ft in 2017,” he says.

Busy year

Leeds city centre office take-up in the first quarter of 2017 has already been strong, notes Clare Bailey, associate director in the commercial research team at Savills. With several other organisations on the lookout for space this year, the firm is anticipating that take-up could reach as much as 800,000 sq ft by the end of the year, which would exceed the city’s long-term average by around 45%.

Leeds is firmly on the radar of major global occupiers such as Google - Paul Fairhurst, Savills

“This would be 94% above the 2016 total and the busiest year on record,” says Bailey.

However, there is a potential fly in the ointment. If these projections are met, that could lead to a significant imbalance between supply and demand in Leeds.

“While the city centre continues to expand south and west, with a number of mixed- use schemes being brought forward, there remains a growing need for more office development in order to keep pace with demand,” cautions Bailey.