There are challenges ahead for the UK's regional office markets, although many locations performed better than expected in the second quarter of this year. This is according to Knight Frank, which revealed the take-up of office space across the 11 cities included in its survey increased by 32 per cent when compared to the first three months of 2012. However, the organisation pointed out the figures are still below the 2011 quarterly average, despite the improvement.
Partner and head of the Manchester office for Knight Frank David Porter commented: "The lack of high-quality available space across the regional markets, particularly in prime areas, is slowly leading to deals hardening." He acknowledged that it is still very much an occupier's market, although he highlighted the limited options available in the UK's regions, especially for larger offices. As a result of the low level of supply, an increasing number of companies could turn to "design and build" projects, Mr Porter suggested.
Knight Frank concluded property investors will remain "generally cautious" when it comes to making an investment in regional offices for the next year. Last month, Ben Burston, associate director of forecasting and real estate strategy at DTZ, told a webcast run by the organisation there are several reasons why the UK commercial property market is more attractive to investors than other destinations in Europe. He cited the marginally higher yields available on UK assets, as well as the fact the country is "outside the troubled eurozone" as the main factors contributing to interest in UK real estate investment.
Occupier demand is expected to continue at current levels for the remainder of this year, the Knight Frank report stated, with some markets experiencing surprisingly high demand for premises in the second quarter. Aberdeen, Edinburgh and Glasgow stood out as the only three regional markets where take-up exceeded the quarterly average recorded the previous year.
- Thursday 02 August 2012