Office and industrial rents in Leeds continue to rise but a lack of investment stock has led to a sharp fall in investment activity, according to Carter Jonas.
A new record headline rent for the city centre of £30/sq ft was set in May with the letting of 6 Queen Street to Burberry, which was also the largest letting during the first half of the year.
Another record tumbled last month when HMRC agreed a pre-let at 7 and 8 Wellington Place, which at 378,000 sq ft was the largest office letting ever recorded in the city.
Occupier demand is likely to remain strong, says Carter Jonas. An increasingly broad range of occupiers are looking for space, with technology, media and telecoms (TMT) and professional services firms particularly active this year, it adds.
“Leeds is now one of the UK’s foremost centres for fast-growing firms, behind only London and Cambridge,” says Bruce Allan, head of valuations, north department, at Carter Jonas.
With demand still robust and the supply of grade-A space limited, the firm expects more deals to be secured around the £30/sq ft mark this year. Carter Jones is also optimistic about the outlook for rents in the industrial market around Leeds.
It is forecasting that for mid-sized units of between 20,000 sq ft and 50,000 sq ft, rents will approach £6/sq ft from their current level of £5.75/sq ft.
However, the strong outlook for the occupier market is not matched by a positive outlook for investment. There were only £71.9m of deals across Leeds’ commercial property market in the first half of 2017, less than a third of the £217m recorded in H1 last year and the lowest H1 total since 2003.
“A low level of investment stock has hampered activity, despite demand remaining prominent,” says Carter Jonas.
As for pricing, yields have “tightened somewhat” for the very best office buildings since the end of 2016. However, it adds that yields for prime, good-quality properties are unchanged at 5.25%. Industrial and retail yields also remain static at 5% and 4.75% respectively.