Leeds City Centre Offices
Q3 : 2010 www.kingsturge.com
Market Overview Q3 : 2010
• Grade A availability stands at 590,000 ft2
, though no
new space will be delivered before 2012. The market
will benefit from this supply, as confidence recovers.
• Speculative development remains on hold so, with
many major occupiers facing lease events, a return in
pre-letting is in prospect from next year.
• Take-up remains down on the long-term average.
Demand continues to be limited from larger occupiers,
though there are signs that confidence is returning.
• Prime headline rents remain at £27/ft2
, but with a
relatively constrained supply in the prime core, we
expect an increase over the medium term.
• There have been relatively few prime investments
over recent months although yields would be
expected at 6.25% at the current time.
10 South Parade
Leeds City Centre Offices Q3 : 2010
The supply of new Grade A office accommodation
immediately available in Leeds City Centre has
decreased to just under 600,000 ft2
build and quality refurbishments.
This follows the development of four major new
schemes in 2007-08: Highcross’ Broadgate, The
Headrow (167,500 ft2
) and Toronto Square (90,000
); IVG’s No.1 Leeds (123,500 ft2
); and Deltalord’s
The Mint (117,500 ft2
). All of this space remains
available with the exception of approximately
let at Toronto Square. However, looking
at the current supply in detail, just 150,000 ft2
situated in the prime office core, with the majority in
more peripheral areas of the City.
Given that average annual take-up of Grade A
accommodation in Leeds is around 250,000 ft2
current availability represents the equivalent of 2-3
years supply in a stable market. As a result, Leeds
is well placed for when the market does recover.
Good underlying demand and a lack of speculative
development will allow the market to absorb this
Only one speculative scheme remains under
construction in Leeds City Centre which is Wilton
Developments’ 10 South Parade. The building is
part new build, part refurbishment extending to circa
and is already 35% pre-let.
In terms of overall pipeline supply, it is possible
to identify over 4 million ft2
in various schemes
City-wide. However, the majority of developers are
incapable of starting on-site within 6 months, as
most do not have detailed planning consent or the
ability / willingness to build either speculatively, or
with partial pre-lets in place.
Given the current uncertainty in financial markets,
there are no proposals to build speculatively. It
is highly unlikely that any new development will
commence until well into 2011, given market
conditions and the lead-in time for construction to
commence. Therefore, the earliest a new
building could be delivered would be late-2012 or
Assuming Grade A take-up is in line with the
long-term average before this date, the lag in the
development cycle will result in a shortage of Grade
A space from 2012.
No speculative new build office scheme is expected
to start on site during 2011. However, there are
several major occupiers having lease events
between 2011 and 2015. This is expected to result
in a return of pre-let driven development activity in
It is impossible to predict which buildings will start
on site within the next 2 years, as developers
are constantly re-visiting their masterplans and
development programmes. But the next cycle
is expected to be led by one of the City’s major
schemes, such as Wellington Place, Whitehall
Riverside, City Square House or 6 Queen Street,
which has just received detailed planning for
68,000 ft² in the heart of the traditional prime core.
Leeds City Centre Offices Q3 : 2010
Demand for office accommodation in Leeds city
centre has slowed over the last two years in line
with the wider economic downturn (see chart 1).
Take-up in 2009 totalled 390,000 ft2
, well below the
long-term average of 525,000 ft2
. Grade A take-up
accounted for just under 50% of this total, which is
close to the long-term trend.
Take-up in Q2 2010 was disappointing, decreasing
44% on the previous quarter to one of the lowest
figures on record at 48,000 ft2
. But Q3 saw an
improvement to 69,140 ft2
to bring take-up to
in the year to date. Nonetheless, without
an even more dramatic improvement in Q4, activity
is unlikely to reach last year’s levels and prevent
2010 being the worst year in over a decade.
The size of lettings continues to fall with the
average this year being around 2,800 ft2
three deals over 10,000 ft2
. Lettings of less than
ft account for over 80% of the total deals
so far in 2010. Given the size profile of space under
offer, we expect this trend to continue.
Professional services and financial sectors have
historically been the driver of demand in Leeds, but
have been subdued since the credit crunch (see
chart 2). The public sector has held up better, but
after the Spending Review, this demand may also
be less buoyant. Meanwhile, all sectors continue
to adopt a cautious approach, delaying relocating
as long as possible, and landlords are offering
competitive deals to avoid costly voids, which is
further limiting churn.
But there are more encouraging signs for the future.
Local job growth is expected to be driven by the
private sector in areas such as industry, technology
and media, as well as a reinvigorated financial and
business services sector. This year, the major deals
in Leeds have primarily involved these dynamic
sectors and this pattern is set to continue (see
Occupier Address Size (ft)
GE Capital Livingstone House 15,060
BSkyB 2 Wellington Place 14,450
Skills for Care Westgate 11,620
Xafinity 10 South Parade 9,400
Surfachem 2 The Embankment, Sovereign Street 8,300
Source: King Sturge
There are also important long-standing named
requirements which remain unsatisfied in Leeds
(table 2), while agent-led requirements will further
bolster take-up in 2011. In addition, there will be
significant structural office demand. King Sturge
estimates that there are 2.4 million ft² of lease
breaks or expiries due over the next five years
for the market as a whole. Not all will result in
new take-up, but these events should provide the
opportunities to support a recovery in demand from
Occupier Size (ft2
Walker Morris 100,000
Lupton Fawcett 30,000
Clarion Solicitors 20,000
Watson Wyatt 20,000
Hiscox Insurance 20,000
Source: King Sturge