Three exceptionally large lettings of more than 100,000 sq ft each helped make the final quarter of 2016 the busiest of the year across the UK’s nine largest regional office markets, figures from GVA’s latest Big Nine report show.
Take-up in the fourth quarter was 2.5m sq ft, which is significantly higher than the 1.9m sq ft total recorded in the prior quarter.
City centre take-up was especially strong in the last three months of 2016 at 1.67m sq ft - 30% above the five-year average. The strong city centre figures were boosted by three extremely big deals - Swinton Insurance taking 165,000 sq ft at 101 Embankment in Manchester, HMRC taking 107,000 sq ft at 3 Glass Wharf in Bristol and Hugh James Solicitors taking 100,000 sq ft at 2 Central Square in Cardiff.
Manchester’s office market was particularly busy. In the city centre, almost as much space was transacted in the final three months of the year as in the first three quarters combined. In addition to several large deals, GVA says there were many deals of below 5,000 sq ft, which are “testament to the depth and strength of the central Manchester marketplace”.
Bristol and Newcastle also enjoyed a busy final three months of the year. It was the strongest quarter in more than a year in Newcastle city centre, with eight deals of more than 5,000 sq ft.
The strong third-quarter figures helped take-up across the Big Nine reach 8.7m sq ft for the whole of 2016, which is down about 9% on the exceptionally strong 9.6m sq ft recorded in 2015, but it is 3% above the five-year average.
The Big Nine review also reports modest improvements in rents and reductions in rent-free incentives during 2016. Average headline rents ticked up 2.4% to £28.06/sq ft during the year and average rent-free periods fell from 21 months to 20 months. Net effective rents rose by 3.6%.
Regional city office markets “continue to be supported by the relatively constrained development pipeline”, says Carl Potter, GVA’s national head of offices, predicting that the market will remain robust in 2017 despite the “issues of Brexit and Trumpism”.
“Overall take-up will be bolstered by public sector requirements from the Cabinet Office as these are firmed up over 2017 and 2018,” he says.