The Big Nine

gvamidlands

1VDWt9I

Research

The

Big

Nine

Quarterly review of

the regional office

occupier markets

Q1 2016

Summary

The first quarter of 2016 has

witnessed the highest level

of take-up during Q1 across

the Big Nine cities since

2008, amounting to 2.3

million sq ft, 13% above the

five-year quarterly average.

This continues the strong

occupational story of the

past two years with Q1

figures characterised by a

significant number of larger

deals: six over 50,000 sq

ft, with Morgan Stanley’s

155,000 sq ft pre-let in

Glasgow standing out.

One Chamberlain Square, Paradise, Birmingham

The construction market

is responding to this

demand, with the latest

wave of activity initiated

by Paradise and 3 Snowhill

in Birmingham and 122

Waterloo street in Glasgow.

Carl Potter,

National Head of Offices


4.0

City

centre

Q1 2016 total take-up

1.47m sq ft

+17%

above five-year quarterly average

• Deals to Morgan Stanley and

ACCA in Glasgow doubles

quarterly average take-up

• Key deals in Birmingham

and Bristol lift take-up

50% above average

• Net effective headline rents

increase by 7.5% over the

year to Q1 2016

Out of

town

Q1 2016 total take-up

0.86m sq ft

+7%

above five-year quarterly average

• West Edinburgh secures

107,000 sq ft deal to

Napier University

• Take-up well above average

in Leeds and Newcastle

• Headline rents between

£21 psf in Bristol and

£14.50 psf in Cardiff

Top five city deals

(Q1 2016)

City/property Occupier Sq ft

Glasgow – 122 Waterloo Street Morgan Stanley 155,000

Birmingham – 1 Chamberlain Square PwC 90,000

Bristol – Bridgewater House EDF Energy 81,200

Edinburgh – Quartermile 4 Cirrus Logic 70,000

Glasgow – 110 Queen Street ACCA 55,000

Top five out-of-town deals

(Q1 2016)

City/property Occupier Sq ft

Edinburgh – South Gyle BP Napier University 107,500

Newcastle – Q4, Quorum BP Sitel 47,600

Leeds – Kirkstall Forge Zenith 45,000

Manchester – Cavendish House, Sale Styles and Wood 26,500

Bristol – 155 Aztec West Hoare Lea 20,300

Headline Rent

40

35

Big Nine average

headline rent

£27.78

(up 3.7% since

Q1 2015)

Average

rent free

20

months

(down 16% from

23.8 months

at Q1 2015)

Net effective

headline rent

£23.81

(up 7.5% since

Q1 2015)

£ psf

30

25

20

15

10

5

0

Manchester Edinburgh Birmingham Glasgow Bristol Leeds Cardiff Newcastle

Headline rent

Net effective rent

Liverpool

4.5


Q1 2016

The Big Nine

Regional office market review

Take-up across the Big Nine

office markets has witnessed

the strongest start to the year

since 2008. Q1 figures were

anchored by some very

large deals, particularly in

the city centre. The largest

deal was to Morgan Stanley

in Glasgow, while key deals

to PwC in Birmingham, EDF

Energy in Bristol and Napier

University in West Edinburgh

lifted take-up in these cities to

well above average. Overall

city centre and out-of-town

take-up amounted to 2.3

million sq ft, 13% above the

five-year quarterly average.

Morgan Stanley’s deal in Glasgow was

a 155,000 sq ft pre-let at HFD Property

Group’s 122 Waterloo Street. The scheme

started construction at the beginning of

the year, with potential to enable further

development of the adjacent 215,000

sq ft at 177 Bothwell Street. Any additional

Grade A space in Glasgow will be

welcomed as accountancy body ACCA

has taken the remaining 55,000 sq ft at

BAM’s 110 Queen Street, while at 1 West

Regent Street only two and a half of the

11 floors remain available.

Indigenous professional service firms

have driven take-up to the highest

Q1 figures on record in Birmingham

(283,000 sq ft). PwC has agreed a

90,000 sq ft pre-let on the top four

and a half floors at One Chamberlain

Square, Paradise Circus, on a 20 year

lease. Meanwhile Pinsent Masons will

take 40,500 sq ft at the redeveloped 55

Colmore Row and DAC Beechcroft have

moved from BrindleyPlace to Tricorn

House in Edgbaston. Confidence in the

occupational market is emphasised

by M&G Real Estate’s decision to fund

the largest ever speculative office

development outside London; 420,000

sq ft Three Snowhill, expected to

complete in 2019.

The largest deal in the Bristol market was

81,200 sq ft to EDF Energy at Bridgewater

House, secured on a 15 year lease.

Meanwhile two deals on recently

refurbished space, 27,000 sq ft to Fraser

Nash Consultancy at Narrow Quay

House and 15,500 sq ft to JLL at Great

George Street, have achieved rents of

£27 psf. This is only £1.50 psf below the

current headline rent, although Arup are

reportedly under offer at £30 psf on a

40,000 sq ft pre-let at Redcliff Wharf, due

to start construction this summer.

'000 sq ft

1,600

1,400

1,200

1,000

800

600

400

200

-

Q1 2016

Big Nine take-up

City Centre

5 year

quarterly average

Q1 2016

Out-of-town

Newcastle Manchester Liverpool Leeds

5 year

quarterly average

Glasgow Edinburgh Cardiff Bristol Birmingham

There were two very large deals in the

Edinburgh market. 107,000 sq ft was

taken by Napier University at South Gyle

Business Park, West Edinburgh and in

the city centre American audio chip

designer Cirrus Logic took the remaining

70,000 sq ft at Quartermile 4. A number

of professional service company lease

events are due over the next year in the

city centre. With most of the new stock

pre-let, some re-gears are expected at

least in the short term. Despite two strong

quarters in the out-of-town market, a

number of large requirements remain.

Manchester has seen a slower than

expected start to the year largely due

to Freshfields’ anticipated 80,000 sq ft

commitment at Muse’s One New

Bailey not completing before the end

of the quarter.

Q1

This major letting and expected

commitment from the Department

of Work and Pensions (50,000 sq ft),

Irwin Mitchell (20,000 sq ft) and Money

Supermarket (20,000 sq ft) are likely

to bolster second quarter figures.

The largest deal in Leeds city centre was

to Sky Betting and Gaming, who have

taken two floors (40,000 sq ft) at the

recently completed 6 Wellington Place.

Another key deal was 24,000 sq ft prelet

to accountants RSM Tenon who join

PwC at the 200,000 sq ft Central Square

scheme, due to complete at the end of

this year. In the out-of-town market vehicle

leasing company Zenith have agreed a

45,000 sq ft pre-let at the Kirkstall Forge

regeneration area.

Take-up in Liverpool city centre (90,000 sq

ft) has held up well following the strength

of the two previous quarters (each over

100,000 sq ft). During Q1 26,000 sq ft was

taken at Walker House including 11,500

sq ft to Brooks Bell and co, while at Mann

Island another 11,000 sq ft deal was

completed to Seadrill. There is a healthy

pipeline of new requirements which

should see take-up levels maintained at

this higher level of demand.

The largest deal in Cardiff was a 12,500

sq ft pre-let to Opus Energy Limited at 2

Central Square, which completes next

year. However, significant transactions

are expected this year with Motor

finance company MotoNovo negotiating

a 70,000 sq ft deal at the recently

completed 130,000 sq ft One Central

Square, in a move from Cardiff Business

Park. Also the Cardiff School of Journalism

is expected to complete a 15-year lease

on 30,000 sq ft at 2 Central Square.

Net effective headline rents increased

by an average of 7.5% across the big

nine cities over the year to Q1 2016 as

rent free periods fell to 20 months on a

ten year term. However the rate of growth

has slowed from the double digit annual

growth experienced last year.


Key

Office Take-up (sq ft)

Glasgow

Edinburgh

City Centre take-up Q1 2016

City Centre 5yr quarterly ave

Out-of-town take-up Q1 2016

Out-of-town 5yr quarterly ave

Newcastle

upon-Tyne

Leeds

Liverpool

Manchester

Birmingham

Cardiff

Bristol

City Centre

Q1 2016

Birmingham 283,697 185,877

Bristol 195,502 135,140

Cardiff 74,306 95,394

Edinburgh 178,696 155,712

Glasgow 288,987 143,402

Leeds 128,724 145,282

Liverpool 90,000 80,601

Manchester 196,533 259,925

Newcastle 29,250 52,556

5 year Quarterly

Average

Out of town

Q1 2016

Birmingham 48,142 91,709

Bristol 75,172 73,776

Cardiff 21,493 29,248

Edinburgh 186,196 48,434

Glasgow 86,282 85,688

Leeds 136,605 85,773

Liverpool 20,000 46,270

5 year Quarterly

Average

Manchester 139,639 221,583

Newcastle 143,497 122,459


In focus: Newcastle

The out-of-town market

continues to dominate

occupier activity in

Newcastle. Q1 take-up

amounted to 143,500 sq

ft, 17% above the fiveyear

quarterly average.

Sitel took the largest

deal, 48,000 sq ft at Q4,

Quorum Business Park,

while Accenture has

taken a further 15,000 sq

ft at Cobalt Business Park.

Availability on these two business

parks has fallen considerably over the

past eighteen months with a steady

level of deals. Elsewhere out-of-town,

Litterboss has acquired 12,100 sq ft at

Digital House in the Team Valley.

Grade A availability in the city centre

now stands at 130,000 sq ft. Based

on average past take-up rates, this

equates to around 1.5 years’ supply.

However, the Stephenson Quarter’s

35,000 sq ft Rocket, completed at

the end of last year, is rumoured to

be under offer.

With prime supply diminishing,

refurbishments are coming forward:

Commercial Estates Group is

refurbishing 60,000 sq ft at Cuthbert

House and Schroders is undertaking

a 10,000 sq ft major refurbishment of

Earl Grey House. These refurbishments

will be seeking to establish a new

level of rent for refurbished stock,

which currently stands at £17.50 psf.

Following EY’s 22,900 sq ft deal at

One City Gate East at the end of last

year, headline rents have increased

to £22 psf with 12 months’ rent free

on a ten year term.

This equates to a net effective rent

increase of 14% over the past year.

Rental aspirations from developers

however are likely to be closer to £24

psf before any further new builds get

underway.

Tony Wordworth

Director

Newcastle

Rents and Yields

City centre headline rents Q1 2016 (£psf)

Location Rents (£) Rent free (mths

on ten yr term)

Net effective

rent* (£)

Manchester 34.00 24 28.05 25.33

Edinburgh 32.00 18 28.00 27.13

Birmingham 32.00 24 26.40 23.25

Glasgow 30.00 21 25.50 24.65

Bristol 28.50 18 24.94 23.51

Leeds 26.50 18 23.19 23.40

Cardiff 24.00 15 21.60 17.74

Newcastle 22.00 12 20.35 18.15

Liverpool 21.00 30 16.28 16.28

Average 27.78 20.00 23.81 22.16

*Including rent free period less three month fit-out.

Net effective

rent (£) Q1 2015

Out-of-town headline

rents Q1 2016 (£psf)

Location

Rents

(£)

Manchester (South) 20.00

Bristol 21.00

Birmingham (Solihull) 21.00

Leeds 18.00

Newcastle 16.95

Glasgow 16.50

Edinburgh 16.50

Cardiff 14.50

Liverpool 14.00

Average 17.38

Prime city centre yields

Location

End

2015

Q1

2016

End

2016

Birmingham 4.75 5.00 Same

Bristol 5.25 5.25 Same

Cardiff 5.75 5.75 Same

Edinburgh 5.25 5.25 Same

Glasgow 5.25 5.25 Same

Leeds 5.25 5.25 Same

Liverpool 6.00 6.00 Same

Manchester 4.75 4.75 Same

Newcastle 6.00 6.00 Same


London

Birmingham

Bristol

Cardiff

Dublin

Edinburgh

Glasgow

Leeds

Liverpool

Manchester

Newcastle

Published by Bilfinger GVA.

65 Gresham Street, London EC2V 7NQ.

©2016 Copyright Bilfinger GVA.

Bilfinger GVA is the trading name of

GVA Grimley Limited and is a principal

shareholder of GVA Worldwide Limited,

an independent partnership of property

advisers operating globally. Bilfinger GVA

is a Bilfinger Real Estate company.

Should you wish to discuss the findings

of our research in greater detail

please do not hesitate to contact:

Carl Potter

National Head of Offices

0121 609 8388

carl.potter@gva.co.uk

Mark Beaumont

National Head of Investment

020 7911 2183

mark.beaumont@gva.co.uk

Giles Tebbitts

Research

020 7911 2670

giles.tebbitts@gva.co.uk

@GVAOffices

08449 02 03 04

gva.co.uk

This report has been prepared by Bilfinger GVA for general information purposes only. Whilst Bilfinger GVA endeavour to ensure that the information in this report is correct it does not warrant

completeness or accuracy. You should not rely on it without seeking professional advice. Bilfinger GVA assumes no responsibility for errors or omissions in this publication or other documents

which are referenced by or linked to this report. To the maximum extent permitted by law and without limitation Bilfinger GVA exclude all representations, warranties and conditions relating

to this report and the use of this report. All intellectual property rights are reserved and prior written permission is required from Bilfinger GVA to reproduce material contained in this report.

Bilfinger GVA is the trading name of GVA Grimley Limited © Bilfinger GVA 2016.

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