Prime rents across the UK’s office markets recorded notable increases since the start of the pandemic, with occupiers’ flight to quality driving a supply/demand imbalance for best-in-class office space, underpinned by access to high-quality amenities, space on standout floors, and strong sustainability credentials.  

According to CBRE research, Leeds has recorded the strongest prime rental growth of the 10 city office markets analysed outside of London and the South East. The city’s prime rents stand at £37psf – reflecting an increase of 23% since the start of the pandemic (Q4 2019 to Q2 2023). This represents the strongest prime rental growth of any major office market in Europe, excluding the London West End core markets of Mayfair & St James’s.

Berlin’s prime rent growth since the pandemic stands at 16%; Milan at 15%; Paris at 14%, followed by Amsterdam at 9%.

By comparison, in the same period, Bristol (21%), Liverpool (21%), Edinburgh (19%), Birmingham (19%) and Manchester (18%) recorded significant prime rental growth. The trend is continuing into H2 2023, as evidenced by Glasgow prime rent reaching £39.50psf from the pre-Covid level of £32.50psf.

Rental value growth has also been exceptionally strong in some South East office markets, most notably Oxford where prime rents at the end of Q2 2023 reached £63psf, an increase of 70% from the level seen in Q4 2019. The increase has been driven by the lack of prime stock available and the huge growth of the science and tech sector, fuelling demand for office and lab space.

Despite overall take-up outside of London declining year-on-year by 13%, demand for the best quality space was high across the whole of the UK in H1 2023. Two of the three largest deals in Q2 took place in newly completed space, led by RE-defined taking up 36,300 sq ft of new space at Louisa Ryland House in Birmingham.

In tandem, the supply of new, grade-A space remains at critically low levels in some markets.

Simon Brown, head of UK Office Research, said: “One of the consequences of the supply/demand imbalance for the best quality space has been rapid rental growth at the prime end of the market. Deals transacted since the start of this year have set record high benchmark rents in most cities and many city office markets are recording prime rental values ahead of pre-Covid levels.”

Matt Willcock, executive director, office investor leasing, at CBRE, added: “Beyond London, our major city office markets are outperforming many of the major European markets – Berlin, Milan, Paris – in terms of prime rental growth and values. While broadly speaking take-up may have slowed, it’s clear there is healthy demand from occupiers seeking new, high-quality sustainable office space that enhances connectivity and wellbeing in a collaborative environment.”

Figure 1: Percentage change in prime rental values, Q4 2019-Q2 2023, UK and select major European office markets.

Work will complete on a new multi-million-pound build to rent development in the heart of Leeds city centre in the next two weeks.

The development, known as Q Three Residence, has seen a former eight storey office building transformed into 133 studios and one-bedroom apartments on Westgate, close to both Leeds Town Hall and the city’s financial district.

The scheme will be owned, operated and managed by Leeds-headquartered property company, YPP Lettings and has been designed by Brewster Bye Architects.

In addition to the fully furnished homes, Q Three Residence will offer communal areas with open lounges, workspaces, a private dining room and choice of gyms, including a health suite for women. There will also be a concierge service and ultrafast Wi-Fi.

A spokesperson from YPP Lettings said: “This is another exceptional development from YPP Lettings that is ideally located just a short walk from the railway station, the universities and the city’s main retail and business areas.

“As a result, we’ve been inundated with enquiries and have already agreed a healthy number of lettings, with the vast majority being taken by young professionals and students, which will create a fantastic community. There are now only a couple of studio apartments still available, and the one-bedroom apartments are also going fast.”

Andrew Chapman, a director at Brewster Bye, said: “Q Three Residence has seen a 1980s office building repurposed and transformed into a hugely impressive residential development and there’s no doubt it’s going to be a special place to live.

“We’ve specifically designed the scheme to combine high quality apartments with superb communal areas and as work approaches completion, it’s exciting for everyone involved in the project to see our designs becoming a reality. The apartments on the upper floors are another genuine highlight, and we’ve devised these to maximise their far-reaching views across the city centre and beyond.”