UK cities outside of London are showing rapid take-up of commercial office space by investors, according to a recent report from Savoy Stewart.
The commercial property specialists analysed city reports compiled by Knight Frank in order to calculate office space take-up and total investment volume in ten UK cities in 2018.
The full list of cities included in the report is as follows:
Manchester, the UK’s second-largest metropolitan area after London, ranked top on several measures, including the greatest overall office investment volume of just under £990 million, up 8% year-on-year.
The North West city also had the greatest take-up by floor area, at just over 1.75 million square feet in 2018, a substantial increase of 44% on the previous year’s total.
Elsewhere there were isolated examples of significant growth and performance, including north of the border in Glasgow where take-up spanned over 960,000 square feet of office space, 52% more than in 2017, and total investment of just under £470 million.
In Yorkshire, Leeds set a blistering pace of growth at 185% more than the previous year, topping £360 million in investment in 2018 compared with £127 million the year before.
All about location
Yet again, location proved to be the number one search criterion for the majority of businesses looking for commercial real estate, with a massive 84% ranking it top of their list when seeking new premises in 2019.
But the most popular cities for commercial real estate investment – and the least popular – are dotted all across the country.
After Manchester and Glasgow, Birmingham was third by floor space take-up on about 755,000 square feet, adding the Midlands to the North West and Scotland at the top of the table.
Meanwhile at the bottom of the list were Newcastle and Sheffield; however, even Newcastle posted strong gains compared with 2017, with floor space investment up by a third from 178,000 to 237,000 square feet.
In terms of the money coming into each city’s local economy thanks to investment in office space, Manchester again pipped Glasgow to the top spot.
This time Leeds’ rapid growth rate helped it to third place on the virtual podium; Newcastle, again bottom of the list on £62 million of investment, again made gains of 24% compared with the £50 million spent there in 2017.
And Sheffield, second-last on the chart for floor space, very nearly matched its Yorkshire rival Leeds in terms of growth, up from £54 million in 2017 to nearly three times as much in 2018, an increase of 180% to over £150 million.
The total investment in commercial real estate in the ten UK cities covered by the report makes for some dizzying totals.
Nearly 6.73 million square feet of take-up and a staggering £3.35 billion of capital was poured into the ten cities in 2018 by commercial real estate investors.
So other than location, what factors encouraged them to set aside concerns about Brexit and the traditional focus on the London market, to instead look at office uptake in the regions?
In an accompanying survey of more than 400 office-based businesses, Savoy Stewart asked respondents to list search criteria that are significant areas of focus in 2019.
The factors – which excluded price – were as follows:
- Location (84%)
- Size (76%)
- Legal considerations/Added costs e.g. lease, utility bills (73%)
- Infrastructure e.g. internet/telephony (69%)
- Parking/Local amenities (67%)
- Options for future growth (58%)
- Style/layout (52%)
- Competitors nearby (25%)
Darren Best, managing director of Savoy Stewart, said: “On the face of it, take-up and investment volumes in different cities outside of London indicates a strong and promising outlook for the office market, though some cities’ scope for office space seems to be more active and resilient to economic pressures than others.
“This research also provides a great insight into the primary factors businesses are putting high on their agenda when searching for office premises this year, with some surprising outcomes.”
Disclaimer: The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.