Five of the ‘Big 6’ regional office markets are facing a supply shortage of prime office stock that is hiking rents and fuelling the growth of refurbishment projects, according to the latest data from Savills.
Birmingham, Bristol, Edinburgh (pictured), Glasgow and Leeds all have less than 12 months’ worth of prime supply and if there is an average year of take-up in 2023 supply could fail to meet demand next year, according to Savills’ data. Of the ‘Big 6’ Manchester is the only exception.
Scottish markets will be harder hit with no developments set to complete in 2023 and just 150,000 sq ft of prime space available across Edinburgh and Glasgow markets. Refurbishments will now be a key focus of the UK regional office market in the years ahead for both landlords and occupiers, according to Savills.
Five of the ‘Big 6′ markets recorded prime rental increases in 2022, with Bristol and Leeds achieving 12% and 6% growth respectively. Savills’ latest forecasts anticipates further increases in prime rents in Birmingham, Bristol, Edinburgh, Leeds and Manchester in 2023. By 2025, prime rents could be as high as £45/ sq ft in Bristol, with all the regional Big 6 markets expected to surpass the £40/sq ft mark in 2025.
James Evans, head of national office agency at Savills, said: “The market proved its resilience through a much worse economic period in 2020/21, in some cases delivering record prime rent levels. The factors that drove this resilience are still in place, specifically an under-supply of prime space, a contracting development pipeline, strong demand for best-in-class space and further centralisation into city centres. As such, the current prime Grade A availability levels means that supply levels are likely to remain constrained in the coming years.”
Clare Bailey, commercial research director at Savills, added: “Businesses are now more likely to demand a greater range and level of facilities to create an enhanced experience for their employees to encourage them back into the workplace. While many companies have adopted work from home strategies in the wake of the pandemic, their city centre offices, are even more important as places for staff to collaborate, to instil company culture, and to attract the best and brightest talent.”
