The report is the most comprehensive and authoritative view of the sector published by LSH to date. It researches 28 centres nationwide and shows that office take up in 2007 was the highest peak in the market, with the impact of the credit crunch and the economic slowdown most likely to be felt in London over the course of the next year.

The South Yorkshire region has experienced strong and improving performance over the past few years, with Sheffield seeing a 370,000 sq ft take up in 2007. Sheffield rents are expected to rise from £21.50 to £22.00 per sq ft by the end of the year.

Guy Gilfillan, head of LSH's Sheffield office, said: "The economy has undoubtedly slowed down and this will have some impact on the office market. However, the city centre occupier market still remains steady and predictions show that some growth is expected in rents over the course of the year.

"Despite the uncertainties in the global credit markets, the prospects for Sheffield during 2008 remain positive and deals are still being done. Sheffield is in an advantageous position as it does not have a reliance on the struggling financial services sector such as its Leeds and Manchester neighbours.

"The Sheffield office market has always been buoyed by significant public sector demand and there has been a recent growth in high technology and precision manufacturing which has a need for quality office space to support its industrial activity.

"A number of professional services companies, including legal practices, are also seeking an estimated 150,000 sq ft of space. This provides a healthy balance and a good basis for continued growth."

Key recent deals include The Fire Service's pre-let on 40,000 sq ft in Eyre Street and South Yorkshire Transport Executive has taken 43,636 sq ft at The Square in Dixon Lane. The University of Sheffield is also currently developing its 34,000 sq ft offices at North Campus on Broad Lane.

There are significant occupier requirements in Sheffield, including the Department for Innovation, Universities and Skills which is in the process of procuring 90,000 sq ft in the city centre. The University for Industry is also seeking 50,000 sq ft.

There is a substantial level of ongoing development in the pipeline, predominantly consisting of pre-credit crunch speculative development. This includes Sheffield Business Park and Carillion's The Square, which will deliver more than 60,000 sq ft by the end of the year.

LSH is also marketing a number of Renaissance South Yorkshire's strategic sites, including GMI and Valad's Sheffield Digital Campus. This currently comprises 100,000 sq ft across two buildings, with a further 400,000 sq ft of development proposed.

Guy added: "This is a significant office scheme for the city, of a scale and location that will provide the first real opportunity Sheffield has had to differentiate itself from other major UK destinations.

It will be a unique and high quality digital offer that will not only appeal to Yorkshire's home-grown industries but is set to attract inward investors from around the globe.

"A true business park environment, Sheffield Digital Campus is in a prominent city centre location and sits adjacent to Sheffield Hallam University which is vital for its future development as the proximity to two top class universities offers unrivalled access to 60,000 university students and potential spin-off businesses."

There has also been an increase in mixed-use development in the city, with Citygate S1 bringing 60,000 sq ft of office space and a 120-bed Travelodge in early 2009. CTP St James is also proposing 60,000 sq ft of offices and a hotel on Sheaf Street.

Wilson Bowden's NUM site on Carver Street will deliver 175,000 sq ft of offices as part of a mixed use development.

Guy concluded: "The vacancy rate for existing space is low at 4.3% but this rises to 11% if the space under construction is included. As a result Sheffield has a healthy balance of supply and demand in terms of high quality office space.

"The continued growth in professional and business services will generate further demand particularly for Grade A space. However, the credit crunch is undoubtedly restricting the availability of funds for new development, which will create an imbalance in the medium to long term."



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