There are signs some of the UK's regional office markets are experiencing an upturn in tenant demand, which has been fuelled, in part, by a reduction in the amount of Grade A space available in certain locations. According to the latest CBRE Regional Offices Marketview report, cities such as Leeds, Edinburgh and Aberdeen are among those to have seen growing interest from corporate occupiers in recent months. However, there are still regional markets that are lagging behind, with the organisation highlighting Bristol and Birmingham as two destinations where take-up has slowed down since the start of 2012.
Savills also pointed to Manchester as a regional centre where a recovery is expected this year, noting in its Quarter 1 Spotlight on the Manchester Office Market report that the supply of Grade A space is falling, which will put upward pressure on rents, while the city's appeal to several "sunrise industries" will help protect it from cuts in the public sector and financial services industry. "The city's strength in media, new media, education and biotech are all factors that will insulate it against the drag of public sector austerity," the firm stated.
The CBRE research also pointed out lease expiries among large companies will help boost take-up in office markets around the UK, as tenants begin to assess their options and look for new space. Ashley Hancox, head of regional office agency at CBRE, commented: "We are aware of a number of major corporates who face lease expiries in the next two years. These requirements will alleviate the pressures felt as the UK moves out of recession. Manchester in particular looks set to perform well in the second-half of the year, as a number of large requirements come to fruition."
CBRE also noted yields for prime regional offices have drifted to "historically high levels", with head of regional capital markets at the firm Rob Silvester explaining this has helped attract institutions looking for commercial property investments in the UK. He said there are signs of "renewed interest" from investors who have been drawn in by the yields offered by this asset class.