Regional Office Space market

The lack of liquidity in the financial markets is having an adverse impact upon growth in the office space market right across the UK. According the CB Richard Ellis, investment levels even outside the capital in cities such as Leeds, Bristol and Birmingham were down between 60 - 80 percent last year. The amount of transactions for purchases also fell last year, as it is difficult to place value on properties in this uncertain economic climate. The gap between what a property is worth and it’s potential rental yield has been getting smaller making property become less attractive to investors. Overall capital values have fallen by 4% this year, with further decreases possible.

The City of London has seen the steepest fall in demand, but it is of course an exceptional case due to the prevalence of financial institutions.  It seems other major cities are coping much better with the credit crunch. The rental market shows the sharpest contrast between London and the rest of the country; in Q1 of this year rental values in London saw no overall growth. One of the major problems is the plethora of new office space coming onto the market. Lack of supply, especially for grade ‘A’ office space has really helped landlords in cities such as Edinburgh. Rental values rose a healthy 9.4% there last year but according to Colliers CRE these levels will be achieved again in the near future.

Of course if you are looking to lease office space then the increasing supply will be beneficial as it will keep rental values competitive.

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