The Big Nine

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.