Investors eyeing active regional office markets outside London

Investors eyeing active regional office markets outside London

1 May 2013 by Simret Samra
Posted in News Headlines

Key regional office markets outside of London witnessed a resurgence of interest from investors in Q1 2013, with strong demand for prime office stock.

http://www.knightfrankblog.com/commercial-briefing/news-headlines/investors-eyeing-active-regional-office-markets-outside-of-london/

Total investment turnover was c.£600m outside London and the South East, a 27% increase from Q1 2012, Knight Frank’s Regional Office Market Report has shown.

Knight Frank’s Anthea To, Associate, Commercial Research, said: “Foreign investment interest in regions has increased compared to a year ago, although it remains to be seen whether this marks the start of more sustained interest from foreign investors in the regions.”

Henrie Westlake, Partner, Head of Knight Frank’s Leeds Office said investors have been drawn by attractive pricing and strong market fundamentals.

“The diminishing supply in the regional markets coupled with an almost non-existent development pipeline bides well for future performance. With sectors of the London market viewed as ‘overheated’ by the impact of foreign investors, a growing number of institutional investors are looking to regions outside of London. Whilst stock selection has never been more critical, there are genuine opportunities for well advised investors to find value in the key regional centres.”

The Knight Frank report revealed a number of regional office markets, such as Bristol, Leeds, Manchester, Sheffield and Newcastle, saw Q1 take-up exceed last year’s quarterly average.

Meanwhile, across the regions, prime headline rents have been broadly stable however, an increase in net effective rents have been recorded, particularly in Cardiff and Birmingham, reflecting a fall in Grade-A supply with steady levels of demand.

There was a slight increase in the supply of Grade-A space in Q1, totalling 3,067,043 sq ft compared to 3,013,043 sq ft in Q4 2012, a fall of 11% year-on-year.

The first quarter also saw a healthy level of requirements with an increase in Newcastle (60%) and Aberdeen (36%), although the majority of interest is up to 5,000 sq ft.

David Porter, Partner, Head of Knight Frank’s Manchester office added: “With virtually no speculative development we are now into a full pre-let market for those occupiers seeking Grade-A Office space in excess of 50,000 sq ft, or less in certain regional centres.

“The lack of good quality accommodation is driving interest from some of the larger UK developers who see the more active regional markets, such as Manchester, Aberdeen and Birmingham as an attractive offer outside of London and the South east.”

Click here to view our interactive map which provides a brief snapshot of recent activity in key UK cities

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