The Big Nine

Research
The
Big
Nine
Quarterly review of
the regional office
occupier markets
Q2 2016
Summary
Overall take-up figures have
held up reasonably well
during the second quarter
of the year in spite of the
referendum uncertainty.
Some significant deals
have completed in the
public and insurance
sectors and underlying
demand across the ‘Big
Nine’ remains strong,
particularly given the
reorganisation of the
public sector estate and
a large number of private
sector lease events. Some
occupiers have been
reviewing their position in
light of ‘Brexit’ and it is likely
that this will impact on
take-up for the second half
2 Kingsway, Cardiff
of the year but it is too early
to judge how significant
this will be. We expect
any impacts on the value
of grade A stock to be
insulated by the subdued
development pipeline.
Carl Potter,
National Head of Offices

City
centre
Q2 2016 total take-up
1.22m sq ft
–3%
Compared to the
five-year quarterly average
• Headline deals to public
and insurance sectors
• Above average take-up
in Birmingham, Bristol,
Cardiff and Glasgow but
disappointing activity
elsewhere
• Net effective headline
rents increased by 4.9% over
the year to Q2 2016 and
there was no change
during Q2
Out of
town
Q2 2016 total take-up
0.79m sq ft
–4%
Compared to the
five-year quarterly average
• The largest deal was
41,700 sq ft to SKY at
City Park, Glasgow
• Strong take-up in Glasgow,
Birmingham and Manchester
• Headline rents between
£21 psf in north Bristol and
Solihull and £14 psf
in Liverpool
Top five city deals
(Q2 2016)
City/property Occupier Sq ft
Birmingham – Baskerville House Network Rail 83,400
Bristol – The Core Direct Line 63,100
Cardiff – Brunel House
Undisclosed
public sector
54,500
Glasgow – Cuprum, Argyle Street AXA Insurance 49,400
Newcastle – The Rocket Convergys 35,000
Top five out-of-town deals
(Q2 2016)
City/property Occupier Sq ft
Glasgow – City Park Sky 41,700
Birmingham Business Park –
2300 The Crescent
Uniper 32,700
Manchester – Turin Court, Stockport Standard Life 23,350
Newcastle – Cobalt 7b Leeds Building Society 20,100
Manchester – Two Didsbury Point Southway Housing Trust 20,000
Headline Rent
40
35
Big Nine average
headline rent
£27.78
(up 3.1% since
Q2 2015)
Average
rent free
20
months
(down from
22 months
at Q2 2015)
Net effective
headline rent
£23.80
(up 4.9% since
Q2 2015)
£ psf
30
25
20
15
10
5
0
Manchester Edinburgh Birmingham Glasgow Bristol Leeds Cardiff Newcastle
Rent free
value
Net effective
e
e rent
Liverpool

Q2 2016
Q2
The Big Nine
Regional office market review
Take-up across the ‘Big Nine’
office markets during the
second quarter was 3%
below the five-year quarterly
average for both the city
centre and out-of-town.
This brings the total for the
half year to 3% above the
H1 average, following a
stronger start to the year.
In the city centre markets there were
a number of sizeable deals agreed
this quarter, with Cardiff, Bristol and
Birmingham recording well above
average take-up. Conversely other city
centres saw some slowing in activity, as
expected in the run up to the referendum.
The insurance sector made up just over
20% of all take-up in transactions over
5,000 sq ft in Q2 with key deals to Direct
Line and AXA, while the public sector also
provided some ballast to the figures (14%)
with Network Rail and an undisclosed
occupier being the largest deals.
Strong take-up levels continue in
Birmingham where the significant deal at
the beginning of Q2 was 83,000 sq ft to
Network Rail at Baskerville House, bringing
the half year figures to over 500,000 sq ft
for the second year in a row. Throughout
the quarter, viewing activity and enquiry
levels held up, while there was a slowdown
in the quantity of transactions, which
reflected the pre-referendum uncertainty.
This was the case across other cities
and the ‘Brexit’ vote will likely prolong this
uncertainty, causing some occupiers to
review their strategies. However the affects
across most markets will be somewhat
insulated by the shortage of quality stock
and constrained development pipeline,
with the prominence of more cautious
pre-let development activity witnessed
over the past two years.
Requirements for the 13 new regional
HMRC hubs and the GPU Hub programme,
the reorganisation of the public sector
estate, will present significant opportunities
across the regional markets for grade
A transactions. The grey space that will
be released back to the market will also
present challenges as well as refurbishment
and change of use opportunities.
Three sites have been short listed for the
170,000 sq ft HMRC/DWP potential pre-let
requirement in Bristol, with CEG’s Aspire
and AXA’s Assembly Bristol among the
options. In terms of deals Direct Line
stood out, purchasing the freehold of
The Core in Thomas Street at 63,000
sq ft, supported by a handful of deals
between 5 and 10,000 sq ft. OVO Energy
have also taken 23,000 sq ft in Temple
Back which is in addition to their main
office in Temple Quay. Other city centre
requirements include 25 - 30,000 sq ft for
Lyons Davidson Solicitors and a handful of
10 to 15,000 sq ft requirements.
Million sq ft
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Big Nine take-up
Q3 2015 Q4 2015 Q1 2016 Q2 2016
Out of town City centre 5 year average
AXA’s relocation from Atlantic Quay was
the largest single letting in Glasgow and
creates full occupancy at Cuprum, a
large grade A office development that
competed in 2010. Take-up was supported
by serviced office provider Regus taking
29,000 sq ft at London and Scottish’s
flagship holding, Tay House and a string of
significant but smaller transactions.
The level of activity in Manchester over
the first half of the year has been lower
than the past two years. There is strong
underlying demand for the second half of
the year but it is uncertain what effect the
referendum result will have on this. Swinton
Insurance have 160,000 sq ft under offer
at 101 Embankment, Freshfields are due
to complete imminently on 80,000 sq ft
at New Bailey, DWP have a 80,000 sq ft
requirement and PwC are interested in
taking further space at 1 Spinningfields.
Total take-up has been subdued in
Edinburgh city centre, although the
number of deals was up on the previous
quarter. The largest deal was to the
Postcode Lottery, who acquired 33,000
sq ft on Charlotte Square, comprising
a combination of A-listed townhouses
and new build open plan space. Large
requirements for the GPU and HMRC
are joined by financial and professional
requirements such as Aberdeen Asset
Management, State Street Bank and
EY. The choice of grade A availability is
limited for all these deals, although M&G’s
final building at Quartermile, is now under
construction and due for completion at
the end of 2017. 1st September will see
the new energy regulations impact on the
sale and lettings of commercial property
in Scotland. This will affect buildings of
more than 1,000 square metres that do
not meet energy standards equivalent
to those introduced by the 2002 Building
Regulations.
Newcastle city centre was dominated
by the key deal of 35,000 sq ft to
Convergys at the newly completed
Rocket in the Stephenson Quarter. Space
continues to be absorbed in the out-oftown
market with Leeds Building Society
being the largest deal of 20,000 sq ft at
Cobalt Business Park.
In Liverpool there were two deals in excess
of 10,000 sq ft during Q2. Interserve took
17,234 sq ft at Cunard Building & Mott
MacDonald took 11,431 sq ft at Royal
Liver Building. Demand remains strong
and there are a number of large deals
currently in legals. During the first half
of the year there has been in excess of
a million sq ft of transactions, which is
primarily due to the sale of vacant or
lower grade office buildings for alternative
uses such as hotel & residential. The
most recent example was the sale of
Silkhouse Court (122,000 sq ft) to Fortis
Developments & Signature Living for
residential conversion.
A slowdown in activity in Leeds is
tempered by the knowledge of a
handful of mid-size requirements that
are expected to fall into the second half
of the year, including Ward Haddaway
taking a floor at 5 Wellington Place.
This quarter Addleshaw Goddard has
increased their presence at 3 Sovereign
Square by 8,000 sq ft, in addition to the
51,000 sq ft already taken.

Key
Office Take-up (sq ft)
Glasgow
Edinburgh
City Centre take-up Q2 2016
City Centre 5yr quarterly ave
Out-of-town take-up Q2 2016
Out-of-town 5yr quarterly ave
Newcastle
upon-Tyne
Liverpool
Manchester
Leeds
Birmingham
Cardiff
Bristol
City Centre
Q2 2016
Birmingham 217,295 188,852
Bristol 185,789 140,343
Cardiff 167,105 88,564
Edinburgh 105,139 151,247
Glasgow 161,527 147,322
Leeds 55,875 140,221
Liverpool 55,000 90,579
Manchester 220,587 256,156
Newcastle 53,962 52,445
5 year Quarterly
Average
Out of town
Q2 2016 5 year Quarterly
Average
Birmingham 102,649 90,142
Bristol 60,603 72,912
Cardiff 34,777 29,458
Edinburgh 52,253 48,750
Glasgow 146,208 91,784
Leeds 72,303 86,860
Liverpool 19,760 43,835
Manchester 221,870 228,410
Newcastle 75,553 123,685

In focus: Cardiff
Office demand remains
strong in Cardiff city centre.
The first half of 2016 has
maintained the high level
of take-up achieved in
2015, at a third above the
five year average.
The key deal in Q2 was to an
undisclosed public sector occupier who
took circa 55,000 sq ft over four floors at
the refurbished Brunel House. This deal,
which Bilfinger GVA acquired, leaves
Cardiff city centre with a shortage of
good quality grade B accommodation.
Cardiff University took another significant
deal of 29,000 sq ft at Friary House.
There were also a number of notable
out of town deals completed between
8,000 and 9,000 sq ft, in a market
where transactions tend to be up to
4,000 sq ft.
Immediately available grade A space
in the city centre has increased recently
to around 140,000 sq ft, from the very
low level of the past two years. This is
a result of a number of completions
including One Central Square and 2
Capital Quarter, as well as the grade
A refurbishment of 2 Kingsway. JR
Smart has also started on site with the
construction of circa 75,000 sq ft at 3
Capital Quarter.
Based on the ten year average grade
A take-up rate of 135,000 sq ft per
annum, this equates to about a year’s
existing grade A supply, although
there are strong expressions of interest
across the majority of it. There is also 7
months’ supply of speculative space
under construction. Headline rents have
increased markedly over the past 18
months rising from £21.50 to north of £24
psf, with rent frees falling from 21 to 15
months on a ten year term. This equates
to a net effective rent of £21.60 psf.
The outlook remains positive with a
number of notable potential active
requirements including Network Rail,
PwC, Cardiff University and Lewis Silkin
coupled with the on-going requirements
for the new public sector Hub.
Tom Merrifield
Director, Cardiff
Rents and Yields
City centre headline rents Q2 2016 (£psf)
Location Rents (£) Rent free (mths
on ten yr term)
Net effective
rent* (£)
Manchester 34.00 24 28.05 26.40
Edinburgh 32.00 18 28.00 27.13
Birmingham 32.00 24 26.40 23.25
Glasgow 30.00 21 25.50 25.08
Bristol 28.50 18 24.94 24.94
Leeds 26.50 18 23.19 23.85
Cardiff 24.00 15 21.60 19.13
Newcastle 21.50 9 20.43 18.28
Liverpool 21.50 33 16.13 16.28
Average 27.78 20.00 23.80 22.70
*Including rent free period less three month fit-out.
Net effective
rent (£) Q2 2015
Out-of-town headline
rents Q2 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 17.61
Prime city centre yields
Location
Q1
2016
Q2
2016
End
2016
Birmingham 5.00 5.00 5.25
Bristol 5.25 5.25 5.50
Cardiff 5.75 5.75 6.00
Edinburgh 5.25 5.25 5.50
Glasgow 5.25 5.25 5.50
Leeds 5.25 5.25 5.50
Liverpool 6.00 6.00 6.25
Manchester 4.75 4.75 5.00
Newcastle 6.00 6.25 6.50

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
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