Prime rental growth in the UK's regional office markets showed signs of returning in 2010, according to a new research report released by CB Richard Ellis. Take-up was seen to significantly increase by 15% against 2009 figures in the report, which examines nine key regions across England and Scotland.
Despite another challenging year for the UK economy, leasing activity continued to grow in all major cities; Birmingham and Manchester performing particularly well, with Manchester having a record 12 months. Take up in the city center reached 1.35 million ft² (125,415 m²) by year-end, a figure bolstered by the unprecedented 30,500-m² Co-op pre-let earlier in the year.
The research also reveals that current supply is now heavily weighted towards secondary stock, which accounts for 77% of available office space in the nine key markets examined outside of London. Availability of prime stock diminished dramatically across the UK, from 5.4 million ft² (approx. 500,000 m²) in 2009 to 4 million ft² in 2010 and this discrepancy is expected to lead to modest rental growth in cities across the UK.
Ashley Hancox, Head of Regional Office Agency, CB Richard Ellis, said: "We expect demand to hold up for 2011 in most cities, but conditions will remain challenging, particularly in the regions which have relied on high levels of public sector acquisition in the past. The sector will be notably subdued in 2011 and beyond, so there will be a need for the private sector to supplement activity."
Andrew Marston, Research Director, CB Richard Ellis, said: "As market conditions continue to improve across the UK, individual office markets have seen positive signs of growth over the past 12 months. Confidence has been undoubtedly buoyed by favorable occupier conditions and major lettings such as The Binding Site's letting in Birmingham and Tesco Personal Finance in Edinburgh, and we have begun to see signs of increases in prime rents in response to diminishing availability.
"Regional office markets in 2010 remained in the occupiers favor and 2011 should see that discrepancy start to even out as supply of prime stock diminishes and developers avoid speculative projects."