UK regional prime office rents record largest climb in two decades

Prime office rents in the UK’s top 10 regional city centre markets have recorded the largest annual climb in more 20 years, according to fresh figures from BNP Paribas Real Estate. According to the firm’s Big Ten Regional Office report – which analyses leasing and investment activity in Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Liverpool, Manchester, Newcastle and Sheffield – prime rents grew by 7.6% year-on-year from Q1 2023 to Q1 2024 on average. This represents the largest annual climb across the big 10 regional markets since Q1 2000 to Q1 2001, when the growth was 9.6%. Josh Arnold, senior research analyst at BNP PRE, said: “Limited supply of new grade-A office space in the regional markets continues to restrict opportunities for prospective occupiers, and this is placing upward pressure on prime rents. “With very tight supply for the most in-demand space, coupled with rising rents, it is now commonplace to see occupiers with upcoming lease events who are seeking office upgrades to act competitively to secure prelets as early as possible. The development pipeline, however, remains scarce and this presents landlords with a significant opportunity to retrofit space to capture this demand for grade-A offices.” The rental growth is underpinned by a continued supply and demand imbalance. Take-up across the 10 major cities tracked by the agent reached 1.14m sq ft in Q1 2024, up by 9.2% on the same period in 2023, while grade-A vacancy rates were just 2.3%. And of the 5.5m sq ft of office space currently under development or renovation, some 38% has already been prelet. Simon Williams, head of national markets at BNP PRE, said: “Leasing activity is largely being driven by occupiers seeking relocations to upgraded office space and this shows no signs of slowing down as corporates embrace new working practices with a focus on quality collaborative workspaces and excellent amenity offers. “This is all very positive news for landlords who are bringing forward grade-A space, or have the ability to. Meanwhile, the changes to permitted development rights should generate more conversions of redundant offices to alternative sectors, and this will be a great boost to regional city centre regeneration.” According to BNP PRE’s figures, professional services accounted for the largest take-up share by occupier type in Q1 at 26.7%, followed by public sector at 15.5% and banking and finance 12.6%. BNP PRE’s top 10 regional cities rental growth City  Prime rent (£ per sq ft) Prime rental growth Q1 2023 – Q1 2024(year-on-year)       Bristol £46 8.2%   Manchester £43 7.5%   Birmingham £42.50 6.3%   Edinburgh £42.50 6.3%   Glasgow £39.50 12.9%   Leeds £38 2.7%   Newcastle £32 10.3%   Sheffield £30 15.4%   Cardiff £25 0%   Liverpool £24 7.5%   Photo courtesy of Citypress