Northern Office Markets
Over the past three years, since the end of the pandemic, the commercial property market has adapted to fulfill new space requirements. As businesses continue to endorse flexible work arrangements, there's been a significant shift towards businesses taking less space, but prioritising top-tier work environments to entice employees back to the office in a hybrid work landscape.
In 2023, this pursuit of quality prompted landlords to invest in asset upgrades to attract tenants. However, the demand for well-situated, eco-friendly buildings continued to surpass the available supply. This trend appears poised to persist into 2024, with 37% of the forthcoming space already spoken for by businesses aiming to cultivate optimal work settings for their employees when they come into the office.
The drive for premium space notably fueled rental growth in the majority of UK office markets in 2023, as many cities achieved record-high rents throughout the year. This momentum is expected to continue in 2024, with an average forecasted growth of approximately 3% across most UK markets.
The typical cost of office space in the UK varies depending on factors such as location, property type, space grade, and duration on the market.
Across the midlands and north there is evidence of businesses reconsidering their space demands as they engage with their workforces demand for hybrid working.
This has allowed many businesses to reconsider their space requirements, and how they interact and use the space they have, the general theme running through the market is occupiers are requiring less space but there is still a strong need for quality space that attracts and nurtures talent in a competitive job market.
ESG is becoming a driving factor in space acquisition requirements, both investors and occupiers are focused on minimising their environmental impact whether that’s through development and refurbishment, or ongoing use of the space. It’s now becoming core to repurposing strategies to provide circular construction techniques, understanding of supply chains, and limits on CO2 emissions throughout the repurposing and as part of ongoing use, alongside improvements that help with the health and wellbeing of the people that interact with the buildings.
Whilst EPC Regulation has driven much of the advances to date, increased costs in energy supplies, and EU Taxonomy are driving further change in the industry. There’s now signficant reasons for occupiers and investors to deliver high-quality, sustainable and healthy offices.
Manchester
KEY OFFICE AREAS
Central Business Dirstrict
Spinningfields
Ancoats and Northern Quarter
Piccadilly
Media City & Salford Quays
Manchester Airport
Overview
Manchester is the largest and fastest growing regional centre in the UK, generating wealth equal to that of Leeds, Liverpool and Sheffield combined, coming second only to London both in business terms and the quality of its city environment and amenities.
Manchester is home to over 7.2 million people within an hours drive of the city allowing employers to draw upon a large and skilled workforce boosted by the UK’s largest university and Europe’s largest student population. With a 65% retention rate, businesses benefit from a strong well educated future workforce.
The thriving city in the northwest of England has made it the number one regional UK City for tech companies to locate and significant inward investment has seen office space taken by the likes of Microsoft, Amazon, Google, IBM and Booking.com.
The tech sector is complemented by other industries including creative industries and growing digital ecosystems in areas such as FinTech. As the UK’s second largest creative, digital and tech hub, Manchester has a thriving community of businesses and is home to many major businesses, like fashion manufacturers Boohoo, online retailer THG (The Hut Group), and online electrical and white goods retailer AO.com.
Further developments in the knowledge economy has seen the growth of scientific space at Manchester Science Park, a science corridor along Wilmslow Road complimented by space in Alderley Edge aimed at businesses who require lab space.
Alongside this the city is also popular for major industries like finance, legal and business services, biotechnology, and tourism.
ESG Credentials
Manchester is the highest ranked big 6 city by Climate Emergency UK in terms of what it is doing to improve its impact on the Climate. The City Council has set a target to provide a zero- carbon city by 2038 or before – at least 12 years earlier than the national 2050 target. Using science based targets Manchester aims to reduce their emissions by 13% per annum halving its direct, energy related emissions by 2025.
It is ranked as one of 122 global “A list” cities as ranked by the Carbon Disclosure Project. They have assessed cities globally on their environmental impact. It has ranked 122 cities as “A list” which are the highest scoring in terms of their commitments to transparency and climate action. These cities are doing 3 times the amount of climate mitigation and adaption measures as non A list.
The Manchester Climate Adaptation and Resilience Advisory Group was established in early 2020 to guide the Council’s effort in developing informed targets on resilience and adaptation, to identify how action across the city might be supported, and to make recommendations regarding how progress can be monitored and evaluated.
Key objectives include;
Staying within our carbon budgets
Climate adaptation and resilience
Health and wellbeing
Inclusive, zero carbon and climate resilient economy
Manchester has highlighted that it is failing to meet its 13% per annum reduction targets in a 2022 update ot the framework. To get back on track it has started modelling emissions data to look for ways to further decrease its emissions and has called for urgent action to reduce direct emissions from buildings and ground transport, and to increase renewable energy generation, if Manchester is to stay within its carbon budget.
Manchester Offices
In the five years from 2014 - 2019, take-up exceeded 1 million sq ft per annum on average, with 2018 providing a record year of 1.7 million sq ft of take-up - the highest ever regional city take-up. The high levels of take-up have been supported by both indigenous local occupier relocations, such as those of big accounting firms like PwC and EY and solicitors like Eversheds, alongside inward investment from startups and new entrants into the local office market. The City has benefited from the highest levels of inward investment of any of the major UK regional cities, accounting for 35% of the inward investor take-up over the last 5 years, ahead of Birmingham at 29%, with the rest of the regional cities recording between 7% and 11%.
Manchester’s increasing popularity led to record take-up figures in 2023, with 351,000 sq ft in the most recent quarter representing a 23% increase on the ten-year average, and an 8% increase quarter on quarter. Transactions on prime and Grade A space accounted for 52% of total take-up, highlighting the appetite for high-quality space. Overall, there is strong activity and a confident outlook for 2024, with top rent expected to exceed £44.00 per sq ft. There were a number of large deals throughout 2023 with Matillion’s new 28,000 sq ft office at Two New Bailey being one of the largest. Other significant deals for Pinset Masons, Arden University and UA92 made a combined contribution of over 100,000 sq ft to Manchester’s total take-up.
Manchester is innovative, competitive and attractive to investors yet reasonably priced. There is a variety of tenants from companies with regional or global headquarters which include Adidas, Siemens, Kellogg’s and Baker Tilly LLP.
We expect a shortage of high-quality Grade A supply in 2024 to provide further upward pressure on rents and opportunities to refurbish well located assets to meet the demand.
Prime Rents
£43 psf
Birmingham
KEY OFFICE AREAS
City Centre Core
Brindleyplace
Colmore Row
Eastside and Digbeth
Solihull
Snowhill
Smithfield
Arena Central
Overview
Birmingham, is a leading business and cultural centre in the UK, marked by its vibrant office market and diverse industry sectors. Like Manchester, Birmingham is home to over 7.2 million individuals within an hour's drive, the city offers employers access to a vast and skilled workforce, nurtured by the UK's significant educational institutions. With a retention rate of over 60%, Birmingham benefits from a future workforce that is well-educated and robust.
Birmingham has seen its office market thrive, underpinned by its manufacturing heritage and a strategic pivot towards modern industries such as finance, technology, and creative sectors. The city benefits from its geographical location in the heart of the UK, substantial infrastructure investments, and a proactive approach to development. This has made Birmingham attractive to a diverse array of businesses, from burgeoning startups to established global firms.
The demand for Grade A office space remains robust, driven by companies prioritizing quality and sustainability. Key developments such as Paradise, Arena Central, and Snowhill have been instrumental in delivering high-quality office spaces, with future projects like Smithfield and Eastside and Digbeth set to enhance the office supply further.
ESG Credentials
Birmingham has positioned itself as a leader in environmental sustainability among major UK cities, committing to becoming a zero-carbon city by 2038.
With targets set to reduce emissions significantly each year, the city aims to surpass national goals, driven by science-based targets. It's recognised globally for its commitment to climate action, making strides in climate mitigation and adaptation measures.
The Birmingham Climate Adaptation and Resilience Advisory Group plays a crucial role in guiding the city's efforts towards achieving these ambitious environmental goals
Birmingham Offices
In 2023, Birmingham's office market demonstrated resilience and growth, with a significant uptick in demand for quality office space. The year witnessed a total take-up of 702,993 sq ft across 109 deals, reflecting the dynamic nature of the city's office sector. Notable transactions underscored Birmingham's appeal across various sectors, including legal firms, financial services, and educational institutions. The scarcity of Grade A office space against a backdrop of steady demand highlights the ongoing need for development and refurbishment of existing properties. Birmingham's office market is characterised by its diversity, with a robust presence of both SMEs and multinational corporations .
In Q4 2023 alone, Birmingham's office market saw its most successful quarter, with a total take-up of 240,274 sq ft across 37 deals, indicating a strong end to the year. Notable transactions included law firm Mills & Reeve's acquisition of 32,088 sq ft at One Centenary Way and the largest deal of the year with Lloyds Bank taking 59,896 sq ft at 6 Brindleyplace. This quarter's performance helped the city surpass the 700,000 sq ft mark for the first time since 2019, showcasing Birmingham's sustained market resilience and appeal to major sectors .
In addition to a strong market performance, Birmingham, like other cities, is witnessing a 'flight to quality,' with businesses increasingly seeking high-quality, sustainable office spaces that can attract and retain top talent. This trend is expected to continue, driven by the development of new buildings and refurbishment projects that cater to the growing demand for flexible, high-standard office environments. Upcoming developments such as Three Chamberlain Square and the Beorma Tower are set to add significantly to the city's Grade A office stock, further cementing Birmingham's position as a leading UK office market.
Prime Rents
£41 psf
Liverpool
KEY OFFICE AREAS
Commercial District
Liverpool Waters
Knowledge Quarter
Baltic Triangle
St Paul's Square
Liverpool Innovation Park
South Liverpool Business District
Overview
Liverpool has emerged as a significant business and cultural hub in the UK, leveraging its maritime heritage, public sector services and vibrant city life, with its growth as a distribution hub. This vibrant environment is supported by an excellent transport network and a strong focus on sustainability and quality in office spaces, making Liverpool a compelling choice for businesses looking to establish or expand their presence.
Liverpool is surrounded by a world class, multi-modal integrated transport infrastructure, helped by its Freeport status, it provides fast and affordable connectivity to London, Europe and the rest of the world. A number of major international organisations have chosen the city to base their operations, including Investec, Jaguar Land Rover, Sony and Cargill.
It has become a magnet for industries such as finance, technology, creative sectors, and life sciences, thanks to its strategic location and substantial infrastructure investments. The city's office market has been very resilient, with significant recent rental growth in recent years, demonstrating Liverpool's capacity to attract major commercial interest.
ESG Credentials
Liverpool City Council has committed to making Liverpool a Net Zero Carbon city by 2030, a highly ambitious goal aimed at addressing climate change.
This commitment involves a comprehensive action plan that includes decarbonising public buildings, expanding green energy usage, and enhancing citywide green infrastructure. Significant progress includes reducing CO2 emissions, planting over half a million trees in 25 years, and introducing sustainable warmth grants to improve residential energy efficiency.
The council also plans to further decarbonize transport and public services, contributing to a sustainable and resilient city environment.
The office market reflects a growing commitment to environmental sustainability and social responsibility, aligning with broader ESG principles. Businesses in Liverpool are increasingly seeking office spaces that align with their sustainability objectives, fostering a healthier, more sustainable urban environment. This trend towards ESG compliance is anticipated to encourage the development of more green-certified buildings and spaces that prioritise energy efficiency, well-being, and sustainable operations, catering to the evolving demands of modern businesses and the community
Liverpool Offices
Liverpool provides significantly lower rental costs compared to cities like Manchester, with average rents at the end of 2023, recorded at £20 per sq ft. This positions Liverpool as a cost-effective option for companies and historically has been a great location for the public sector and back office staff where companies can acquire a skilled workforce at a fraction of the office costs of other major cities. Overall take-up in the last 12-months totalled 486,193 sq ft, and 72% of that was from TMT and Government sectors.
There has been a progressive decrease in Liverpool’s overall office supply between 2010 and 2017 as Permitted Development Rights (PDR) allowed developers to convert offices into hotels and residential. There is still 572,000 sq ft of available space, however there is a shortage of quality office accommodation. There is currently no new build office space available or under construction in the CBD, and the city’s refurbished supply pipeline remains constrained. There will be 331,043 sq.ft of new Grade A space delivered elsewhere in the city in 2025, from schemes at No5 Princes Dock, Hemisphere, and Pall Mall.
In the 5 years (2014 – 2019) prior to the pandemic, average annual take up in Liverpool Central Business District (CBD) was approximately 400,000 sq ft, with a post-Pandemic rebound in 2022 providing take-up of 364,463 sq ft, in-line with the 5 year average. Tenants, as with all major UK cities, are adapting to hybrid working practices, with a focus on quality and ESG credentials. This is providing less demand for the larger office spaces and creating an increase in demand for quality space under 5,000 sq ft.
The Liverpool office market continues to be characterised by a major supply/demand imbalance of high-quality space, resulting in sustained prime rental growth. Prime headline rents in Liverpool City Centre are now evidenced at £29.00 per sq ft with quoting rents for high-quality refurbished schemes in excess of £30.00 per sq ft. Major tenants in the city include Jacobs Crackers, Unilever, Typhoo and The Very Group.
As rental growth increases and interest rates decrease we expect investors and developers to take advantage by repurposing poorer quality assets to meet the growing demand for high-quality sustainable space. We expect businesses will continue to look to relocate to smaller and better quality spaces as they try to minimise overheads and attract and nurture talent.
Prime Rents
£29 psf
Leeds
KEY OFFICE AREAS
Leeds Central
Wellington Place
Burley
Beeston
Pudsey
Hunslet
Thorpe Park
Kirkstall Forge
Overview
In the heart of Yorkshire, Leeds is the third largest city in the UK outside of London, with a rich industrial past which is balanced by its modern, energetic culture. The city region has a £69bn economy, generating 5% of the UK’s output is home to approximately 779,000 and over 7 million people with a 1 hour drive of the City Centre, alongside a significant dynamic student population who continue to reside in the city after graduation.
Leeds is home to eight universities, giving one of the largest concentration of universities in Europe, producing some 39,000 graduates a year and a total student population of around 72,000.
With 32,600 businesses and 6,110 small and medium enterprises, reflecting the diversity and resilience of the economic base. and its central position in Britain, coupled with its international airport, road and mainline rail links, Leeds offers an excellent platform for global businesses looking to develop talent and grow their organisations in the North.
Leeds has over £7 billion of property schemes currently under construction, and a number of high-profile occupiers have chosen the city above other provincial cities including Channel 4 and the new Lloyds banking HQ, ensuring Leeds’ sustained expansion
ESG Credentials
In 2022 Leeds City Council was recognised as one of 122 city authorities across the world leading the way on climate action as part of a list published by renowned international authority, the Carbon Disclosure Project (CDP). They’ve raised over £100m since 2019, averaging £35 million every year to support areas such as electric charging infrastructure, housing retrofit, public building decarbonisation and the expansion of the district heating PIPES network.
2021 saw £25 million of funding secured to retrofit 40 council buildings with renewables, energy efficiency improvements and decarbonised heating. A further £4 million of upgrades to 10 more buildings was announced in September 2022. The LED streetlighting programme roll out has alsohelped reduce energy usage.
As part of that they are committed to making Leeds carbon neutral by 2030, as of 2023 the Council had reduced its energy usage by 23,000 tonnes per annum, or a 37% reduction compared to 2018/19 figures.
Their plan to meet their net zero pledge includes:
Reducing the Council’s carbon footprint
Reducing social housing emissions through their Capital Housing Investment Programme
Reducing pollution and noise
Reducing the level of greenhouse gas emissions from buildings in the city
Promoting cycling, walking and the use of public transport
Promoting a less wasteful, low carbon economy
Reducing flooding and other risks from the impact of climate change
Building a sustainable infrastructure
Helping residents reduce their own carbon footprints
Leeds Offices
Leeds has become a strong and stable location for businesses with office take-up of 618,207 sq ft across 123 transactions in 2022, marginally above the 10-year average of c.594,000 sq ft, rising in 2023 to 653,000 sq ft, 4% higher than the long-term average. This was also 9% higher than the 2022 total and the highest annual take-up since 2019. The largest deal of the year was 124,000 sq ft, which was acquired by Lloyds Bank at 11 & 12 Wellington Place.
In the final quarter of 2023, Leeds take-up totalled 112,000 sq ft across 32 deals and Grade A take-up accounted for 56% of the the Q4 total, showing the good demand for high-quality space, but below that of other regional cities. The Professional Services, Financial and Government sectors were the most active over that period, with deals involving these sectors accounting for 68% of all take-up. When compared to the other big nine markets, Leeds has recorded the strongest prime rental growth over the last five years. Prime rents currently sit at £38 per sq ft, reflecting an increase of 25% since 2019.
Availability in Leeds totalled over 800,000 sq ft in Q4 2023, 11% higher than Q4 2022 and 26% higher than the previous quarter. This is largely due to 107,000 sq ft of space becoming available at West One and the availability of secondary space, which provide a total of 555,000 sq ft, accounting for 64% of the overall total, whilst Grade A and Prime availability accounted for 36% of the supply, totalling 309,000 sq ft.
The Grade A supply currently stands at c.0.80 years, therefore we are likely to see further opportunities to repurpose existing stock, to take advantage of the continued pressure on rents, which are forecast to rise to £43.50 psf by the end of 2027. Good quality assets with strong ESG initiatives will likely be well received by the Leeds market.
The tenant mix in Leeds varies but includes Asda, Capita, Jet2, Sky, Channel 4 and GHD.
Prime Rents
£38 psf
Newcastle Upon Tyne
KEY OFFICE AREAS
City Centre
Quayside
Science Central
Gosforth Business Park
Newcastle Business Park
Cobalt Business Park
Overview
Newcastle is the commerical and administrative capital of the North East and the 7th largest city in the UK, with a resident population of around 283,000 people with 1.4 million people within 12 miles of the city centre. Newcastle Central station is situated on the East Coast main line providing a journey time of 2 hours and 40 minutes to London Kings Cross and 1 hour 30 minutes to Edinburgh.
Total employment numbers of c. 170,000 persons have remained broadly stable over the past decade, however this has masked a major restructuring of the city’s economy as it moved away from the traditional reliance of heavy industry to become a dynamic service orientated economy. Newcastle employment is now dominated by the service sector which accounts for approximately 84% of jobs in the city.
Newcastle is also the dominant retail centre in the North East, benefiting from extensive city centre provision centred around Northumberland Street and the Eldon Square Shopping Centre. In addition, the MetroCentre, one of Europe’s largest out of town shopping centres, is located close by in Gateshead. With approximately 2.2M sq ft of city centre retail space the city ranks 4th in the provincial cities and is ranked 5th out of the 100 PROMIS centres in both spending and number of multiple retailers.
The presence of renowned universities has been pivotal in attracting a skilled workforce, supporting the city's economic growth and fostering innovation. As part of developing an economy that can retain talen the city is developing its tech and science quarter, known as Newcastle Helix, a joint development between Newcastle City Council and Newcastle University. Described as a state-of-the-art city centre innovation district, it’ll provide a landmark 24-acre hybrid city quarter in the centre of Newcastle, aimed at attracting international tech and science businesses, whilst serving the local community and residents.
This reflects the city's growing attractiveness as a business, tech and science location but also highlights the continued demand for modern, flexible office spaces that cater to the evolving hybrid needs of today's workforce.
ESG Credentials
Newcastle upon Tyne is actively pursuing a range of ESG targets, reflecting its commitment to sustainability, social equity, and responsible governance. The city's initiatives align with broader efforts to address climate change, support green growth, and ensure an inclusive economic transition.
Key targets and initiatives include:
Developing a Bottom Up Carbon Inventory (BUCI) and Net Zero Dashboard: Newcastle is creating a local, detailed view on emission sources in the city, which is crucial for targeting reduction efforts effectively.
Promoting Green Skills and Economic Growth: The city is commissioning a green economic sector and skills study to identify gaps, needs, and opportunities. This involves collaboration with educational institutions like Newcastle University, Northumbria University, and Newcastle College to support a low carbon skills transition.
Supporting SMEs in Green Growth: Through the Business and IP Centre Newcastle, the city is providing business support to small and medium-sized enterprises (SMEs), helping them calculate their carbon footprint and form working groups for further action.
Climate Action Newcastle: A community group, dedicated to sharing information, ideas, and actions to tackle climate change. Their efforts include reducing carbon footprints, enhancing green spaces, and supporting Newcastle's aim to become net zero by 2030.
Sustainability Education: Newcastle University offers a Sustainability Management MSc program aimed at developing leaders who can drive sustainability change within organisations.
These initiatives are part of Newcastle's broader commitment to becoming a more sustainable and inclusive city. By focusing on carbon reduction, green skills development, and community engagement, Newcastle aims to lead by example in addressing global sustainability challenges
Newcastle Offices
The Newcastle office market has demonstrated considerable resilience and growth, particularly in the aftermath of the pandemic. This positive trajectory is highlighted by several key trends and developments in the region culminating in prime office rents at Motcomb Estates’ Bank House reaching £32 psf by the end of Q4 2023. This marks year-on-year growth of 14.3%—nearly double the average growth across the top 10 regional city centres.
Newcastle city centre take-up totalled 207,078 sq.ft in 2023, across 39 deals compared to 224,332 sq ft across 45 deals in 2022. Despite the decline, this level of take-up is ahead of the 5-year average of 185,000 sq ft. Grade A city centre take-up accounted for 71% of the 2023 total take-up, which shows significant demand for high-quality, amenity-rich, and sustainable office spaces.
The standout major pre-let was HMRC's lease of 463,000 sq.ft at Pilgrim’s Quarter, where they’ll relocate 9,000 tax workers from Longbenton and Washington. This underscores Newcastle's appeal to public sector entities in search of high-quality workspace at a lower cost than other major UK cities. Other new development’s include; Home Group’s, £30m, 70,000 sq.ft, One Strawberry Lane development, which provides Breeam Excellent and Wired Platinum space, and is quoting £30 psf.
The city’s commitment to developing and refurbishing high-quality office spaces, such as at One Trinity Gardens (75,000 sq.ft) and East Quay 5 (35,000 sq.ft), aims to address the ongoing Grade-A supply issue and meet the rising occupier demand. Newcastle’s Wellbar Central, is a great example of investors refurbishing accommodation to meet the Grade-A supply shortage and occupier ESG demands. Home to Irwin Mitchell, Global Radio, Turnitin, Sky, XPS Pension Group and Advance Business Software, the owners have initiated a rolling ESG upgrade programme to meet the ongoing demand for ESG-aligned space, it will include installation of new heating, ventilation and air conditioning (HVAC) systems.
These developments/refurbishments show a clear trend towards a flight to quality, with businesses seeking out highly specified space that align with their ESG expectations. Local occupiers include Barclays Banks, HMRC, PWC, and Virgin Money.
office take-up for the wider Tyne & Wear market totalled 383,186 sq ft in 2023 compared with 465,438 sq ft in 2022 and 581,262 sq ft in 2021. Q4 totalled 97,073 sq ft across 13 transactions, compared with 58,273 sq ft in Q3, 103,553 sq ft in Q2 and 124,287 sq ft in Q1 2023.
