MARKET NAME Office QX 20XX

MAR K E T B E AT

Office Q4 2021 UNITED KINGDOM 2

ECONOMY: A turbulent year, beginning with strong momentum and ending with recession woes The UK economy has faced its fair share of challenges in 2022, despite beginning the year with strong momentum and having seen a healthy post pandemic recovery throughout the second half of 2021. In line with most major economies, the UK is now facing inflationary pressure, low consumer confidence and is transitioning away from the low interest rate environment that has been enjoyed for over a decade. Whilst it is expected that the UK will enter a recession in 2023, with negative growth recorded in Q3 2022 and forecast for Q4, this recession is likely to be significantly different to those previously experienced. This is due to the key drivers of the recession being weakened incomes and suppressed consumer spending, which are likely to continue in the wake of yet another interest hike to 4.0% in February 2023 – the tenth consecutive increase. With CPI peaking at 11.1% in October, its highest on record, the Bank of England felt the base rate hikes were essential to curb consumer spending and this has largely proven true, with inflation reducing in November and December to 10.5% at the end of 2022. OCCUPIER FOCUS: Big Six activity picks up in Q4, driving up total take-up across 2022 Take-up in the Big Six regions and Central London totalled 3.88 million sq ft in the final quarter of 2022, an increase of 5% on the previous quarter and 4% above the 10-year quarterly average. The Big Six reported strong Q4 leasing activity amounting to 1.29 million sq ft, 17% above the 10-year quarterly average, while 2.59 million sq ft was recorded across Central London, 1% below its respective 10-year average. This took full year leasing totals across all markets for 2022 to 14.51 million sq ft, broadly in line with the 10-year annual average, with 10.47 million sq ft allocated to Central London. Despite the strong finish to the year, the Big Six markets were 8% below their average annual take-up with Central London also 1% down in 2022. Across the market, lower levels of large-scale transactions were recorded in 2022 in comparison to previous years. Deals in excess of 50,000 sq ft accounted for only 11% of Big Six take-up below the 27% five-year average, with 32% in Central London, also below the 38% average. In Q4 2022, the availability rate stood at 8.6% across the Big Six and Central London equating to 32.63 million sq ft, a 1% quarterly decrease. Big Six availability reduced by 5% to 7.52 million sq ft, however Central London availability increased marginally to 25.10 million sq ft – the highest figure recorded in the capital since 2004. Secondary stock formed the majority of available space in both the Big Six and Central London markets, with occupiers seeking higher quality spaces as offices evolve to better support collaboration, employee wellbeing and net zero carbon goals. The flight to quality will continue to place upward pressure on prime rental values, which are forecast to remain broadly stable in 2023 before rising, albeit at a slower pace than in previous years. INVESTMENT FOCUS: Final quarter slump weighs heavily on 2022 investment volumes Office investment across the UK totalled £1.27 billion during Q4 2022, 71% below Q3 2022 and 82% behind Q3 2021 as a result of escalating borrowing costs and wider economic turbulence. Across 2022, UK office investment totalled £18.13 billion, the second lowest annual volume since 2012, beating only the pandemic-marred 2020. The activity slowdown and pricing shifts have resulted in yields moving out across all markets with forecasts pointing to further softening over H1 2023, with liquidity expected to return to the market during the second half of 2023.

12-Mo. Forecast

YoY Chg

8.6% Q4 2022 Vacancy Rate

3.88 m sq ft Q4 2022 Take-Up

£1.27 billion Q4 2022 Investment Volume

KEY ECONOMIC INDICATORS

12-Mo. Forecast

YoY Chg

3.7% Unemployment Rate Nov 2022 0.2% Annual GDP Growth Nov 2022

4.0% Interest rate Feb 2023

TAKE-UP, BIG SIX + CENTRAL LONDON

AVAILABILITY & VACANCY RATE, BIG SIX + CENTRAL LONDON

0 1 2 3 4 5 6

10 15 20 25 30 35

10%

8%

Source: ONS

6%

Millions

4%

2%

0 5

0%

Millions sq ft

Q1 2016

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Q3 2018

Q3 2018

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Q1 2020

Q2 2020

Q3 2020

Q4 2020

Q1 2021

Q2 2021

Q3 2021

Q4 2021

Q1 2022

Q2 2022

Q3 2022

Q4 2022

Q1 2016

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Q3 2018

Q4 2018

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Q1 2020

Q2 2020

Q3 2020

Q4 2020

Q1 2021

Q2 2021

Q3 2021

Q4 2021

Q1 2022

Q2 2022

Q3 2022

Q4 2022

Availability

Vacancy Rate

MA R K E T B E AT

UNITED KINGDOM

Office Q4 2021 2

MARKET STATISTICS Q4 2022

OVERALL VACANCY RATE

INVENTORY (SF)

AVAILABILITY (SF)

CURRENT QTR TAKE UP (SF)

12-MONTH ROLLING TAKE-UP (SF)

SPECULATIVE UNDER CONSTRUCTION (SF)

PRIME RENT (per sq ft)

SUBMARKET

PRIME YIELD

Birmingham

18,625,000

1,044,075

5.6%

210,348

692,700

521,280

£41.00

5.75%

Bristol

14,100,000

778,317

5.5%

111,130

620,236

419,821

£42.50

6.00%

Edinburgh

9,170,177

617,299

6.7%

239,716

492,918

0

£39.00

5.75%

Glasgow

14,059,297

1,385,822

9.9%

89,224

402,281

349,011

£35.50

6.00%

Leeds

13,000,000

919,342

7.1%

210,321

618,207

254,879

£36.00

6.00%

Manchester

22,500,000

2,777,654

12.3%

426,872

1,213,843

578,798

£40.00

5.75%

BIG SIX TOTALS

91,454,474

7,522,509

8.2%

1,287,611

4,040,185

2,123,789

-

-

West End

118, 169,047

6,738,764

5.7%

994,592

3,948,290

4,954,564

£120.00

3.75%

City

44,035,616

14,247,178

9.9%

1,398,015

5,528,532

4,673,670

£72.50

4.50%

East London

23,745,874

4,118,034

17.3%

199,095

729,566

990,500

£55.00

5.25%

CENTRAL LONDON TOTALS

285,950,536

25,103,976

8.8%

2,591,702

10,470,105

10,618,734

-

-

UK TOTALS

377,405,010

32,626,485

8.6%

3,879,313

14,510,290

12,742,523

-

-

KEY LEASE TRANSACTIONS Q4 2022

PROPERTY

MARKET

TENANT

Size (Sq ft)

TYPE

2 Aldermanbury Square

London

Clifford Chance

321,100

Pre-let

20 Brandon Street

Edinburgh

BlackRock Inc

139,172

New lease

HEENA GADHAVI Associate Director, UK Research & Insight

100 Embankment

Manchester

Deloitte

63,066

New lease

Norfolk House

Birmingham

Global Banking School

43,766

New lease

2 Atlantic Square, York Street

Glasgow

Siemens

14,488

New lease

+44 (0) 203 296 2037 heena.gadhavi@cushwake.com

Hartwell House, Victoria Street

Bristol

EPIC

13,141

New lease

The Lock, 8 George Mann Road

Leeds

Everlast

10,303

New lease

KIRAN PATEL Associate Director, UK Research & Insight

KEY SALES TRANSACTIONS Q4 2022

PROPERTY

MARKET

SELLER / BUYER

Size (Sq ft)

PRICE

Fenwick, 63 New Bond Street

London

Lazari

152,591

£430 million

+44 (0) 740 782 5580 kiran.patel@cushwake.com

177 Bothwell Street

Glasgow

HFD Group / Pontegadea

313,116

£207.5 million

Waverley Gate, Waterloo Place

Edinburgh

Patrizia / Kennedy Wilson

217,000

£78 million

A CUSHMAN & WAKEFIELD RESEARCH PUBLICATION

101 Barbirolli Square

Manchester

AEW / La Francaise

83,743

£47.6 million

©2023 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered frommultiple sources believed to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.

Soapworks Offices, Straight Street

Bristol

First Base / Barings

75,000

£40 million

Edmund Gardens, Edmund Street

Birmingham DTZ Investors / The Hillview Group JV ShlomoGroup 67,510

£21 million

Wellington Plaza

Leeds

Legal & General / Asset Capital

21,000

£5 million

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