Not all bad news for regional offices – JLL
It has been widely reported that government cost-cutting is set to hit regional markets for office space this year, while the London offices market powers ahead. But it’s not all bad news, says JLL in its latest national offices overview – Glasgow, Bristol and Manchester are the best placed of the “big six” cities, and the SouthEast could also prove to be an upbeat region for office space.
JLL says little momentum from jobs is forecast for the offices market in 2011. Employment is expected to be broadly flat for all industries combined but prospects vary from sector to sector. The firm says exporters of services, chiefly international financial and business services, will prosper, while TMT and professional services should see slow improvement in line with demand in the indigenous UK private-sector. Domestic finance and related business services remain less certain, however, and public-sector occupiers will clearly be retrenching. JLL says this focus on internationalised sectors with lower levels of public-sector activity will lead to a widening of the North-South divide for office markets.
The highest level of public-sector activity are in second-tier cities such as Liverpool, Newcastle, Nottingham and Cardiff,JLL notes. By contrast, Glasgow, Bristol and Manchester “share a strong underlying economic performance with an ability to capture more diverse sources of demand in a time of austerity,” it notes.
Regional office markets may gain some stability from the unusually high level of lease breaks and expiries due in the next five years, the firm says. “Our research on floorplates over 10,000 sq ft in the Big 6 indicates a potential for 11 million sq ft lease events by 2015, a significant proportion of which would be expected to result in new take-up,” it adds.
Watch out for the SouthEast market, JLL says, after the Thames Valley surprised on the upside last year. “This market has good fundamentals, including its strong overseas bias, the UK’s most important TMT cluster and an unusually small public sector,” it points out.
Looking at rents, JLL says London is set to be the main source of office rental increases in 2011. It expects some growth in the South East in 2011, but only in certain markets within the M25 as they benefit from the “London ripple”. In the regions, no uptrend is expected for at least a year – and some markets will see further downward adjustment, it adds.
