A recent piece of research by CoStar suggested the big six regional cities in the UK (Birmingham, Bristol, Edinburgh, Glasgow, Leeds and Manchester) had seen the level of office investment dip to a four-year low in Q2 2017.
This led them to ask – What’s left to trade?
With office investment agents based in four of the six cities Ryden’s experts respond with their views on what is happening right now in their local area.
In Manchester, Investment Partner Andrew Richardson reports there were six prime office deals in 2016 and there has been five to date in 2017, with another four under offer or consideration. If those further deals complete the total value will exceed the £369m total traded in 2016.
“There is no slackening in investor demand as the fundamentals of the office market remain strong. Although there is little doubt that consistently high investment volumes will reduce as we reach the point in the cycle that every building has been turned over once, this is unlikely to happen for some time. With three new speculative schemes under construction for 2019 the market has some way to run.”
Looking to Leeds, Dan Hodge, Head of Agency notes the city centre office market is smaller than most of the big six with the consequence that the amount of prime Grade A stock is limited and turnover is at a lower level. 2016 was an outstanding year in the city with four prime office investment deals totalling £90m.
“Whilst 2017 has had a slow start in terms of transactions, the demand for prime Grade A Office Investments remains strong. The city centre finally achieve £30 per sq ft and comfortably exceeded the 10 year take up average year on year.”
In Scotland, Glasgow Investment Partner Ian Dougherty reports activity in Glasgow’s office market shows no sign of slowing down with Q2 2017 looking like a blip rather than a trend. Five deals totalling £167m have completed in Q3 2017 including Capella, Morgan Stanley’s Waterloo Street and Citypark and Lone Star has very recently announced it is bringing the 550,000 sq ft Skypark to the market.
“Compared with the other big six cities average prime rents are low in Glasgow, finally hitting £30 per sq ft in 2016, three years later than Birmingham and Manchester. The consequence is when stock does come to market there will be strong investor interest. Investors are continuing to buy into the city’s lack of supply and strong take-up scenario, and we expect further deals to happen. Hopefully this will act as a catalyst to new development which the city urgently requires.”
Edinburgh had seen a strong period of office investment activity in 2016 and into 2017, despite the period of political uncertainty. Although this has not been maintained it is only a slight decline with recent deals including Quartermile 2 and Orchard Brae House concluding. Looking forward there is a reasonable supply of opportunities in the market and with a steady increase in buyers in Scotland the next six months could be a positive time for the office investment market.