Commercial property experts are forecasting that more than 80,000 sq ft of quality office space could be taken up in Sheffield city centre in the first six months of this year, based on findings from a professional research report.
The prediction is based on data from Knight Frank’s Sheffield Market Activity Report which highlights record city centre office rents for Sheffield in the last year, as well as increased investment activity and an improved residential market across the South Yorkshire region.
Sheffield was one of only three of the UK’s 11 key regional markets to see headline office rents rise in 2010.
A steady take-up of Grade A space at prime locations in the core city area included the year’s largest transaction – Kennedys solicitors’ 16,700 sq ft deal at Ventana House. The deal set the record rent for the Sheffield market of £20.00 per sq ft and was described by Knight Frank partner Tim Bottrill as a strong example of “the robust demand evident for the very best city centre accommodation”.
Good quality refurbished space was also in demand in prime locations such as Fountain Precinct which is already 80% occupied.
Mr Bottrill said: “Landmark building The Balance is also now nearing completion and likely to address the demand for Grade A refurbished space.”
A 20% reduction in Grade A supply has reflected a lack of development activity – Sheer Challenge’s Crown House in West Bar was the sole city centre completion last year.
In the industrial sector, the large scale distribution market is expected to remain buoyant in 2011, on the back of a previous year that saw healthy levels of take-up of small to medium-sized stock throughout 2010. Last year also saw a clear revival in demand for big sheds, culminating in more than 1.7m sq ft of take-up in the latter half of 2010 alone.
2010 witnessed a “notable improvement” in South Yorkshire’s investment activity, with the number of recorded transactions increasing by 45%. Sheffield city centre examples included Canada Life’s £24m purchase of St Paul’s Place.
“There is life in the South Yorkshire investment market,” said Andrew Harrison, Knight Frank investment surveyor. “However, there is no substitute for strong local market knowledge. Investors need to undertake thorough pre-bid due diligence on covenant, location, rental and capital values.
“As banks continue to actively take control of under-performing properties, secondary stock levels are likely to increase during the year and into 2012 – presenting value-added opportunities for investors with the appetite for active management.”
David Fletcher, Director of Business Investment for economic development agency Creative Sheffield, said: “Our experience of client preferences certainly matches the findings of this research. We are generally seeing demand for the prime grade A office space in the city centre, where occupiers can enjoy the benefits of the amenities, transport connectivity and outstanding public realm.
“Our challenge as a city going forward is to ensure that we have such high quality office space available for mobile investment projects, such as the recently announced Sky centre, which is moving into Ventana House.”