The rental gap between grade-A offices in Leeds and London is the widest it has ever been, according to research by Savills.
Rents in Leeds currently stand at £27 per sq ft, compared with £95 per sq ft in the City of London.
Savills said this was likely to increase demand in Leeds for northshoring firms seeking lower staff and property costs outside the capital.
Claire Bailey, associate director in the commercial research team at Savills, said: “Over the next five years, almost 10,000 new office jobs will be created in the city, partly as a result of major occupiers relocating back-office functions from London to the North.
“Although we expect prime rents in Leeds to rise to £30 per sq ft in 2019, this will still offer a large discount in comparison to London.”
Leeds city centre office take-up was 121,178 sq ft in Q1 2016, up 51% on the same period in the previous year.
This was boosted by a number of large deals, including 39,605 sq ft let to Hestview (Sky Bet) at Canadian Pension Fund and MEPC’s Wellington Place; 25,000 sq ft let to RSM at M&G and Marico’s Central Square; and 13,800 sq ft let to Dentsu Aegis at Bridge Ventures and Evenacre’s 6 East Parade.
Simon Lister, investment director at Savills, said: “Leeds is on the cusp of some major investment deals, with around £113m of offices currently in solicitors’ hands.
“We understand that around 90% of this is under offer to global investors, which is an important reflection of the UK market as a whole.
“If available, we believe that prime 15-year office stock in Leeds would achieve a net initial yield of circa 5.25%, providing a real buying opportunity while the market is in a state of flux surrounding Brexit.”
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