One of the major Northern Powerhouse players, Leeds ended last year on a high in terms of commercial property activity – and the residential investment property sector is set to boom in 2018.
Knight Frank’s latest Regional Cities Report, which analysed data over the course of 2017 of some of the major cities in the UK outside of London, has revealed that Leeds is firmly on the up after last year’s performance. Commercial investment volumes were only stifled by a lack of available stock at the top end of the market, according to the report, while investor appetite remained high, meaning that the market is ripe for increased activity in the year ahead.
The report also revealed that the city broke three different records in the commercial investment space:
1. Office take-up
For the first time, office take-up in Leeds exceeded one million square feet last year, with vacancy rates falling as more businesses targeted the city. Office leasing activity was almost double that seen in 2016, while it was 88% higher than Leeds’ 10-year national average. The boost to businesses is likely to be reflected in the number of jobs available in the area, attracting the growing number of young professionals who are leaving London and finding new positions in the north.
Knight Frank partner and head of office agency in Leeds Eamon Fox said: “Significantly, three deals above 40,000 square feet were completed during the year, a feature of the market that was absent from 2016.”
2. Biggest ever letting
The Government Property Unit, which works with central government as well as local authorities, agreed a deal to take up a 25-year lease on 378,000 square feet of space at 7-8 Wellington Place in Leeds city centre, which is the biggest commercial property letting the city has ever seen. The transaction will create a new hub in Leeds for HMRC, which will ultimately see an estimated 6,000 civil servants working in the new premises by 2020, while NHS Digital is also expected to move to the new offices once they are completed.
HMRC chief executive Jon Thompson said: “We are delighted to be part of the new UK government hub in Wellington Place, Leeds. This is another step in HMRC’s transformation into a modern, digitally advanced tax authority.”
3. Top city rents
The final record broken in Leeds last year was the increase of office rents to £30 per square foot for the first time in the city.
Eamon Fox commented: “Earlier in the year, Burberry took 46,000 square feet at 6 Queen Street on a 10-year lease. The deal was of major significance to the Leeds market with £30 per square foot being agreed. Prime rents in the city have now shifted upward on the back of this transaction.”
In the residential sector, according to a forecast by JLL, investment property prices could grow by 3.5% in 2018, with an average of 3.7% growth per year over the next five years – surpassed only by Manchester. In particular, demand for build-to-rent in Leeds is growing, as young, “Generation Renters” and wealthy students seek higher quality rental accommodation in the city, particularly as the job market improves. There are currently around 3,500 build-to-rent units in Leeds, with 2,000 more in the development pipeline in the short-term.