UK office take-up hit 4.4m sq ft in the first half of 2016, 11% above the long term H1 average despite ongoing market uncertainty, according to Savills.
The firm’s Regional Office Market Spotlight predicts that overall take up will reach 10.5m by the end of the year which, while 3% down on 2015 will be 15% above the long term average of 9.1m sq ft.
Bristol and Glasgow are expected to perform considerably well, outstripping last year’s take-up levels by 63% and 31% respectively.
Take up of grade-A space across the UK has also increased by 3.4%, to 1.2m sq ft compared to the same time last year.
Rents are forecast to increase in most key regional cities – with Cardiff and Birmingham set to see the biggest year-on-year increase in 2016 at 9% and 8% respectively, due to new developments delivering higher quality offices.
Clare Bailey, associate director of research at Savills, said north-shoring, in particular, will remain a theme over the medium term, as businesses seek to control costs in an uncertain climate.
The report notes availability in the regions is at its lowest yet at 11.1m sq ft, and while 3.3m sq ft is due to complete in the next three years, average grade-A take-up in key regional cities is 1.5m sq ft, resulting in just over two years of supply.
Jon Gardiner, head of national office agency at Savills, added: “Regional office markets will be more ‘cushioned’ than London, as they are less reliant on inward investment and instead are more dependent on local economic dynamics. This notwithstanding, they will be huge beneficiaries of the government’s hub programme, which is set to produce the largest and most high-profile leasing deals across the core regional cities in 2016-2017.”
Despite pre-referendum concerns, the M25 and regional office investment volumes remained strong to the end of July, reaching £3.7bn, 37% above the long-term average for this period.
Examining investment, Bristol, Edinburgh and Manchester all had higher investment levels this year in comparison to 2015 and even post-EU referendum, there is evidence of significant deals like Deka Immobilien’s acquisition of One St Peter’s Square in Manchester from the joint venture between Argent and the Greater Manchester Property Venture for £164m.
Overseas investors have accounted for £2.2bn of regional office investment to the end of July, compared to the long-term average of £1.1bn.
Mark Porter, investment director at Savills, said: “This is the highest proportion of overseas investment ever recorded in the UK regions and we believe that this trend could well continue as overseas investors look to take advantage of the weaker pound.
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