Take-up in UK regional offices reached 10m sq ft last year and is expected to maintain a similar level in 2018, according to the latest Savills’ market watch.
Led by public sector expansion, Savills has forecasts the total office take up in 2018 to reach 9.5m sq ft.
“Take up in the regional office market reached 10 million sq ft during 2017, 12% above the 10 year average. This was driven by a number of large GPU deals, with the public sector accounting for 22% of total take-up,” says Mike Barnes, research analyst at Savills.
“The serviced office sector rapidly expanded during 2017 taking 592,000 sq ft of space, this accounted for 6% of total take-up and a 172% increase on 2016.”
Overseas investment reached a record £2.8bn last year, accounting for 37% of total office investment, 29% of which was from the Far East as a consequence of a weaker pound and increased regional exposure.
Savills expects an increasing number of serviced operators to focus their activity across the regional markets in 2018. Grade A availability, however, is predicted to remain flat at 10m sq ft, 65% of which is within the M25 market.
Excluding the M25, there is an average of 18 month’s supply of Grade A space. This activity added pressure to top rents in 2017, which rose by an average of 3.3% across the regional cities and is predicted to grow 1.8% further in 2018. There remains a shortage of development, with only 561,000 sq ft of speculative space expected to complete during 2018, while 55% of the total office development set to complete by 2019 is pre-let.
“Total availability fell 2% to £30m sq ft last year, with only 561,000 sq ft of speculative development expected to complete during 2018. Looking ahead, 55% of total office development set to complete by 2019 is already pre-let,” Barnes adds. “As a result, this puts pressure on top rents, which rose by an average of 3.3% across the regional cities last year. We expect to see further growth of 1.8% in 2018.”