Take-up across the ‘Big Nine’ office markets (Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Liverpool, Manchester and Newcastle) fell to 1.96 million square feet in Q1 2020 – 8 per cent below the quarterly average, says real estate adviser Avison Young.
Its report says that several large deals were agreed in Q1, yet the overall number of transactions was down on average by 20 per cent, with activity unsurprisingly slowing towards the end of the quarter, says the analysis.
The lockdown is not only creating uncertainty around pricing and occupational requirements but also significant practical difficulties.
However, several deals are progressing regardless, including large pre-let deals, while others are taking a ‘wait-and-see’ approach.
Investment volumes for Q1 reflect a sharp slowdown in activity. The first quarter of 2020 saw just £226 million transact across the Big Nine cities, well below the quarterly average of £561 million. Since lockdown, the overriding theme is of a pause in the market.
Although all investors are more cautious, there is evidence of increased interest from overseas buyers attracted by long-lease properties, made more attractive by the weaker pound relative to other currencies. Overseas investors contributed 42 per cent of the total investment volume for Q1 2020, which included the two largest deals of the quarter.
At the start of 2020, the Big Nine regional office markets were very well placed, with low vacancy, a number of large requirements and significant pent-up demand.
But the report states that there is more sectoral diversity in the regional markets than there has ever been, and this has been further enhanced by inward investment through companies from the South East looking to mitigate costs and the government’s programme to create regional departmental hubs. With vacancy levels at their lowest in 15 years, the regional markets should be well placed to weather the storm.
See the full report please here.