Regional office markets, particularly in the South East, experienced the strongest activity. Notably, growing overseas demand for Central London offices resulted in institutions being net sellers in the second half of the year, and while prime yields remained broadly stable across the UK, average transaction yields fell to their lowest level on record.
In the occupational market, take-up reached a 14 year high at 30.8m sq ft, with the final quarter delivering 8.1m sq ft of this. Over two thirds of the UK’s key office markets recorded 2015 take-up ahead of their respective 10-year annual averages, with stellar activity reported in Manchester (+74%), Edinburgh (+58%), Birmingham (+58%) and Belfast (+54%).
Availability continued to decline, falling by 5% over 2015, with grade B and C accounting for the majority of the reduction. Meanwhile, speculative development is beginning to support an improvement in grade A supply, which increased by 3% over the year. Reflecting ongoing supply shortages and rising confidence among occupiers, a rental growth cycle is now well-established across the UK office markets, with prime headline rents increasing in 28 of the 41 markets reported on during 2015.
Charlie Lake, Capital Markets Director for Lambert Smith Hampton comments: “As forecast, 2015 witnessed investor confidence returning to the regions, with a wide range of overseas investors and institutions attracted by the higher returns away from Central London. With income growth likely to be a key driver for investment in 2016, it is encouraging to see our agents forecast further prime headline rental growth in 26 of the regional markets.”
The LSH UK OFFICE MARKET PULSE is a ground-breaking interactive web-based tool which provides investors, occupiers and developers with detailed insight across a host UK office markets. Updated quarterly, it features information on rents, take-up and supply, and highlights emerging trends in individual business districts.
Tony Fisher, Lambert Smith Hampton’s National Head of Office Agency, explains: “LSH is the only commercial property consultancy with a truly national coverage and the PULSE takes the detailed local, regional and national market knowledge that we have and presents it in a comprehensive, easy-to-use way. This enables people to access real time information in order that they can make informed, intelligent and accurate property decisions.”