Will government lettings boost regional office markets?

Hot on the heels of a 265,976 sq ft office deal in Cardiff and a 270,000 sq ft letting in Liverpool, both announced in mid-August, the GPU is now set to agree a third letting at Taylor Clark Properties and BAM Property’s 300,000 sq ft Atlantic Square, Glasgow.

All have been acquired as part of the Government Hubs programme, which will consolidate staff from multiple departments into new, modern workspaces in a bid to cut costs and modernise facilities.

The Glasgow deal, like others around the country, has been a long time coming. As far back as February, market sources insisted the deal was close, and as time dragged on you couldn’t help but wonder whether the GPU was rethinking its exact requirements in the city. But now the deal, one of the largest in the city’s history, is in its final stages.

It is not the only chunky deal the GPU is undertaking. Its letting at L&G and Rightacres’ Central Square in Cardiff last month was the largest-ever office leasing deal in Wales, while July’s letting at Artisan Real Estate Investors’ New Waverley in Edinburgh was the largest that city had seen in 20 years.

And there is more to come. Negotiations are also understood to be well advanced in London Stratford, Leeds, Birmingham and Belfast where equally sizeable deals are on the cards.

However, it remains to be seen how these lettings will ultimately affect the regional office markets beyond an artificial inflation of this year’s take-up figures.

One expert believes Atlantic Square will provide a much-needed shot in the arm for the city’s office market, which is suffering from a chronic lack of grade-A space. The hope is that once developers register the growing interest, they too will start advancing new projects.

Investors will no doubt be pleased, as the government’s appetite to snap up whole schemes will significantly reduce the remaining supply of space, allowing them to charge interested occupiers punchy rents. That will not be such welcome news for tenants, of course, particularly those seeking a move north to escape the sky-high costs in the capital.

The government is not finished with its acquisitions spree yet. Requirements are yet to be filled in Newcastle and Nottingham and the largest GPU deal of all - a 300,000 sq ft Manchester requirement that has the potential to grow to 900,000 sq ft at a later stage - is also yet to be done. It won’t happen before the parliamentary circus is back in town, but recent form suggests that a decision may not be far off.

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