Rent levels for prime office space in and around Leicester have
held steady throughout the recession, according to new research
from national commercial property firm Lambert Smith Hampton
(LSH).
The figures are in contrast to prime rent levels in Birmingham
city centre and immediate surroundings, which have fallen by nearly
20 per cent since the highs of 2007.
LSH's latest Midlands Office Market Report reveals that rents
for prime office space in Leicester have held steady throughout the
downturn, although incentives to maintain these levels have
remained a feature of the market. However, the report predicts that
because of the low level of development activity in the region,
rent incentives are likely to reduce in the Grade A market where
supply has tightened.
The LSH report confirms fears that the Leicester area, along
with Birmingham and the West Midlands, could face a shortage of
high quality office space in the coming years as demand outstrips
supply in this sector. Supply of prime space is extremely limited
and unlikely to be able to keep up with a steady level of demand
for high end products, with very little new development in the
pipeline. The likely result will be higher demand for good quality
second-hand space, a trend which is already developing in some
areas.
Away from Grade A accommodation, there is a continued picture of
an extremely difficult market. In particular within the city
professional office areas and small out-of-town business parks
there is considerable over-supply of Grade B space. Limited demand
has led to significant incentives which have resulted in a fall in
these markets of around 20 per cent.
Jane Taylor, Director in the Leicester office of LSH said, "The
office sector in the Leicester area has undoubtedly felt the impact
of difficult market conditions with speculative development off the
agenda. However rents and incentives have held stable at the prime
end of the market which is in contrast to the second-hand market
which has suffered considerably."
She added "Most space available is weighted towards the centre
of Leicester with the majority of space being Grade A and Grade B
space with limited tertiary stock, in contrast to other areas. The
picture in the surrounding Leicester environs depends on size,
where there is very little prime space over 5000 sq ft. Occupiers
looking for large out-of-town space are being forced to look at
pre-letting or design and build opportunities."
Ian Leather, LSH Head of Office for the region added, "As an
overview, while there are signs of gradual improvement, a lack of
good quality sites without ownership complications is hampering new
development in the city. In the short term, pre-lets and pre-sales
out of town will predominate."
For more information about Lambert Smith Hampton, please visit
their website here: www.lsh.co.uk