The Big Nine - Quarterly Review of The Regional Office Occupier Markets, Q1 2012

Report Summary:

Prospects for the regional office market have improved significantly since the end of last year. Q1 managed to record average take-up, in what is traditionally the slowest quarter of activity. In addition, a large number of requirements have materialised, giving us confidence of increased activity in Q2 and Q3. The improved sentiment is encouraging occupiers with upcoming lease events to start their search while there is still quality stock available.

• City centre and out-of-town take-up in the nine GVA regional office centres recorded 1,611,000 sq ft in Q1, 2% above the quarterly average.

• The city centre market made up 59% of this total, with 944,000 sq ft of deals, 7% below the quarterly average

• Out-of-town market recorded take-up of 666,000 sq ft, 17% above the quarterly average.

City centre take-up was dominated by activity in Edinburgh and Leeds, with the two largest deals, a 63,500 sq ft freehold sale to the Medical Protection Society in Leeds and 47,800 sq ft pre-let to Brewin Dolphin at Atria 1 in Edinburgh.

Manchester also recorded over 150,000 sq ft of deals, consisting of a large number of smaller deals. While city centre take-up overall was below the quarterly average, Q1 tends to be a seasonal lull. Sentiment has also improved significantly since the end of the year.

This is supported by an encouraging increase in enquiries and requirements, indicating an improvement in activity during the rest of the year. For example, in Manchester and Edinburgh there is up to half a million sq ft of named demand in both cities, similar to the amount of grade A space available. In Manchester, this includes 60 to 70,000 sq ft for Aviva, 140,000 sq ft for Bupa and 80,000 sq ft for Jacobs Engineering.

Activity in Edinburgh city centre continues to dominate over the out-of-town market as quality accommodation is available with sizeable incentives. There is unlikely to be a significant increase in out-oftown activity until supply constraints in the centre translate into reduced incentives and increased rents.

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