< Previous10 Business Link www.blmforum.net COMMERCIAL PROPERTY Business Link reflects on a strong year for Leeds’ office market, as space continues to be in high demand. W ith a thriving office market, Leeds has started 2024 with a flurry of key lettings as the flight to quality continues. It comes after the city witnessed strong occupier demand in 2023, recording the highest level of annual take-up since 2019, according to property consultancy Knight Frank. Total take-up during the year was at 651,461 sq ft, 10% above the five year annual average and a 9% year-on-year Offices in demand increase. Meanwhile the number of deals sealed in 2023 rose slightly from the previous year to 127 completed, 17% ahead of the 5-year annual average. Demand for best-quality space was particularly strong, accounting for 74% of annual take-up, with Finance, Banking and Insurance, and Professional Services sectors leading the way. This is reflected in the largest letting of the year, to Lloyds Banking Group, who snapped up www.blmforum.net Business Link 11 COMMERCIAL PROPERTY 13 Á space standing at 176,286 sq ft, 66% less than the previous year and 34% below the 10-year average for Leeds, showcasing the supply squeeze in the office market. Myriad new developments are on the way though, with 2023 ending with 581,984 sq ft of office stock under construction with delivery due in 2024. 295,939 sq ft of this is speculative, while, comprising of © stock.adobe.com/Chris 124,400 sq ft of Grade A space at 11 & 12 Wellington Place. This marked the biggest occupier deal to be completed across all of the major UK regional cities in 2023. Despite such a significant deal, in general occupiers are downsizing their requirements when moving premises, typically by between 20-30%, as noted by Sanderson Weatherall in its Leeds Office Market Update, as the impact of more flexible ways of working are addressed. “Occupiers are, however trading up when it comes to quality and price with a healthy level of demand from a broad church of end users who are focused on the best quality, most sustainable, flexible and conveniently located work space,” the report added. Amidst positive momentum, 2023 closed with a dip in availability, to a four year low, as reported by Knight Frank, with the availability of Grade A Armstrong house Armstrong House, Armstrong Street, Grimsby, North East Lincolnshire DN31 2QE Tel: (01472) 310301 Email: s.fisher@blmgroup.co.uk Superb Location - - Close to the ports of Grimsby & Immingham - Great motorway links - Close to the town centre Secure off street parking High speed internet availability A range of affordable office sizes 3 3 3 3 Last remaining office suites Prime location in Grimsby Offering a prime position in Grimsby, Armstrong House on Armstrong Street is ideally located. Close to the ports of Grimsby and Immingham, motorway links and the town centre, off-street parking is also available for all staff and visitors, meaning it’s convenient too. Our spacious, welcoming offices are located on the ground floor and are both secure and CCTV-monitored, giving you the ultimate peace of mind. At Armstrong House, when it comes to affordability and with a range of office sizes there are opportunities for all types of business. If you require virtual office services, prices start from just £15 per month. For more information, or to discuss your office requirements call 01472 310301.www.blmforum.net Business Link 13 COMMERCIAL PROPERTY five schemes, 232,688 sq ft is new build, with the remaining 63,251 sq ft undergoing comprehensive refurbishment. Breaking records as a sought-after location, the prime rent for Grade A office space in Leeds has now risen to £38 per sq ft, and with strong occupier demand and a supply-squeezed market, forecasts indicate that prime rents will reach £40 per sq ft by the end of 2024. Meanwhile, in the face of macroeconomic and geopolitical instability, investment volumes were subdued in 2023, finalising at £80.4m, 65% below the 10-year annual average. The largest investment transaction was the sale of the BT Building, One Sovereign Square to Citi Private Bank for £38.5m. Overseas investors accounted for the greatest share of annual investment turnover (56%), owing mostly to the BT Building deal, and with capital coming from the Middle East and South Africa. According to Knight Frank’s UK Cities report, the strong occupier market will mean that investors remain bullish on Leeds offices. With prime office yields not likely to soften further, although secondary yields are more difficult to predict, they seem to have reached a level at which investors are more comfortable to deploy capital, all of which is hoped to stimulate market activity this year. In the opening months of 2024, a number of lettings have been secured, with the aforementioned Wellington Place continuing to be a key location for deals. Global professional services organisation EY will take over 25,300 sq ft in 12 Wellington Place, signifying the firm’s investment in its growing Yorkshire business following record UK revenues in 2023. EY’s new office will provide a modern workspace with more areas for both in-person collaboration and independent working, in support of the firm’s approach to hybrid working. The business’s move means that a total of 228,986 sq ft of office space in 11 & 12 Wellington Place is now fully let 12 months after the building completed. Concurrently, Evelyn Partners, the integrated wealth management and professional services group, has agreed terms to relocate its 85-strong Leeds office to new premises at 3 Wellington Place. The new office will present space for the team to work at both desks and meet with colleagues in collaborative areas, while clients will benefit from additional modern meeting rooms with the latest technology. Moreover, flexible office provider Cubo has expanded its offering at Wellington Place after seeing high demand. Achieving 100% occupancy 12 months post-opening, Cubo has taken a further 7,613 sq ft at 6 Wellington Place, taking its total space at the building to 27,423 sq ft. Elsewhere, national law firm Freeths has revealed a major investment in new offices at Central Square, encompassing its agenda of investing in sustainability and reducing carbon footprint, and providing a flexible working environment. And logistics solutions and supply chain specialist Emerge Global has taken a lease at Grade A office building Altitude 4, Airport West, located opposite Leeds Bradford Airport, as its first office in the region. © stock.adobe.com/LIGHTFIELD STUDIOS14 Business Link www.blmforum.net PETROCHEMICAL SPOTLIGHT Holding a vital role in producing most of the items we come into contact with every day, the petrochemicals sector also has a huge environmental footprint. With intense scrutiny coming from the public, governments, investors and customers, the industry must focus on decarbonisation. Petrochemicals are found throughout our everyday lives across a wide range of products, from clothing to packaging, fertilisers, digital devices, solar panels, wind turbine blades and batteries. Demand for petrochemical products is therefore strong and unlikely to abate any time soon. Despite its major contribution to the global and local economy, the petrochemical sector is facing increasing scrutiny due to its significant environmental impact as we enter a world focused on the importance of sustainability, with the production and use of petrochemical products, primarily derived from fossil fuels, leading to resource depletion, air pollution, greenhouse gas emissions, and mountains of plastic waste. There is thus growing pressure to decarbonise the industry, including from the end of the value chain, with companies that use petrochemicals for products like packaging becoming more eco- conscious. With a more intense exploration of decarbonisation called for, there are a number of pathways those in the petrochemical sector can take to reduce its environmental impact. One of these is by replacing fossil fuel feedstocks utilised demanded Decarbonisationwww.blmforum.net Business Link 15 PETROCHEMICAL SPOTLIGHT © stock.adobe.com/Kalyakan in petrochemical production with more sustainable bio-based feedstocks. First- generation feedstocks from food crops like sugarcane and corn are commonly used options, but with competing demand from the food industry and other companies, looking to second (energy crops or agricultural residues including animal fats, bio waste, waste vegetable oil) and third-generation feedstocks (algae) is suggested. An example of this in action would see food crops or lignocellulose derived from agricultural residues converted into bioethanol, to be used as an input into the production of bio-polyethylene plastics in a petrochemical facility. Worth bearing in mind however are environmental concerns regarding large-scale use of biomass in petrochemical production, due to emissions caused by planting, fertilising, transporting, and processing, as well as the impacts of land use changes. Green hydrogen can also act as an alternative to fossil fuels as a feedstock in synthetic petrochemical production, generated through renewable-powered electrolysis of water, where renewable electricity is employed to separate hydrogen and oxygen atoms in water in a carbon-free process. Hydrogen is already used as an input to produce methanol and ammonia, however as most of the current hydrogen produced is grey (generating significant carbon emissions), green hydrogen offers a chance for decarbonisation. Synthetic methanol, for instance, could be an appealing low- carbon alternative, produced by combining green hydrogen with carbon dioxide captured from emissions elsewhere. Green hydrogen does however face a cost challenge, though this is expected to decrease this decade. Another pathway is electrification of 16 Á16 Business Link www.blmforum.net PETROCHEMICAL SPOTLIGHT equipment in petrochemical factories and increasing use of renewable power. One key process receiving particular attention in this regard is steam cracking; where saturated hydrocarbons are broken down into smaller, often unsaturated, hydrocarbons. This could involve replacing natural gas that is typically used for heating in a cracking furnace with renewable electricity, though there are challenges here in achieving the high temperature needed in a furnace. New technologies are thus being explored to facilitate electrification, with Coolbrook and Linde Engineering last year signing a strategic partnership to collaborate on the development and deployment of Coolbrook’s RotoDynamic Reactor (RDR) technology to replace burning fossil fuels with clean electricity in ethylene plants. With steam cracking in ethylene plants one of the most energy-intensive and CO2-emitting industrial processes globally, the collaboration aims to reduce global CO2 emissions by approximately 200 million tons annually. In addition the RDR technology, which allows feedstock to enter a high-speed rotor and use generated kinetic energy to heat up a furnace, improves energy efficiency and targets to increase ethylene yield compared to traditional cracker technologies. Implementing carbon capture, utilisation, and storage (CCUS) technologies is a further option gaining pace, to reduce emissions released from petrochemical production. CCUS captures CO2 emissions from industrial processes, uses the captured CO2 in a commercial process to generate value, and stores the remaining emissions to stop their release into the atmosphere. Positively, CCUS can be integrated with the industry’s existing technologies and www.blmforum.net Business Link 17 PETROCHEMICAL SPOTLIGHT infrastructure, and would not require substantial overhauls of manufacturing processes, however developing CCUS facilities involves significant capital investment and operational expenses. Alongside technology for capturing carbon dioxide from the air, companies may need to invest in other physical infrastructure, including transport pipelines and geological storage facilities for captured emissions, where capacity for CO2 storage may be limited, with competition for these storage sites from other industries. Improving end-of-life management of petrochemical products is also crucial to mitigating the environmental impacts of the industry. Recycling and reusing plastic products is a vital element of this, developing a circular economy for plastics to keep materials in use for as long as possible rather than disposing of them. This means products must be designed with end of life in mind, in order to be easily disassembled and recycled. With a circular economy for plastics, raw material inputs, waste, and life cycle carbon emissions associated with petrochemicals can be reduced. Chemical recycling is an important area of focus in this for many companies, and contrasts to traditional mechanical recycling that simply remoulds or reshapes the same polymers into new uses by instead breaking down plastic waste to its building blocks to be reconstituted back to its original raw materials to be reconverted into a petrochemical feedstock. Technical and logistical challenges arise here though, for gaining access to waste plastics, with boosting collection, sorting, and public buy-in essential to enhancing recycling rates. There are endless opportunities to improve the environmental impact of petrochemicals, but it is in integrating multiple of these pathways that the best results will be found. This could involve switching to biomass feedstocks while utilising complementary CCUS technologies to capture and sequester carbon dioxide released during the combustion of these, also known as bioenergy with carbon capture and storage (BECCS). While major investment will be critical to scale-up, with demand for decarbonisation growing from the public, governments, investors and end users, and carbon neutral and net zero goals ramping up, it may be essential to the future of the industry and business competitiveness. Indeed petrochemicals could be made with almost no carbon emissions, according to a report from research firm BloombergNEF (BNEF), if the industry invests an extra $759bn by 2050, with electrification and carbon capture and storage highlighted as playing a central role in reducing emissions. “Large-scale capex spending must start before the end of the decade if the petrochemical industry has any hope of reaching net-zero,” said Ilhan Savut, sustainable materials analyst at BNEF and lead author of the report. “Deploying these technologies will be expensive in the short term, but it could set the sector on a lower-cost decarbonization path. Given their long asset lifetimes, chemicals players must move quickly and fund net-zero projects as soon as possible, or risk getting locked out of key technologies. Investments today will be key to managing longer- term costs and pay dividends post- 2035.” © stock.adobe.com/Boonchai18 Business Link www.blmforum.net FREIGHT, STORAGE AND MOVEMENT D uring the end of 2023 and continuing into 2024, one of the largest challenges to the global freight industry is the persistent onslaught of Houthi attacks targeting vessels navigating the Red Sea. What began as targeted strikes on Israeli-owned ships in mid-November swiftly escalated into a broader threat, encompassing politically neutral vessels, and thereby creating uncertainty over maritime operations worldwide. Despite the formation of an international coalition spearheaded by the US in late December, aimed at safeguarding trade vessels, the attacks persist. In a bid to shield their assets, major carriers initiated the rerouting of containers away from the Red Sea, necessitating detours. Consequently, extended transit times and delayed deliveries became the new norm. The ramifications of these diversions were far-reaching, affecting carriers representing a substantial 60% of the industry’s total capacity, diverting millions of twenty-foot equivalent units (TEUs) away from the customary path through the Suez Canal. Notably, diverted routes now entail an additional transit time of 7-14 days, with the looming spectre of congestion adding to the industry’s woes. These prolonged distribution times have also affected the availability of transporters in the market, particularly affecting Asian ports of origin, with shipments having escalated during the beginning of February to support the Lunar New Year festivities. This has resulted in delayed returns of empty containers to the originating ports, leading to reports of certain container types becoming scarce, not just along Red Sea routes but across various Asian lanes. Some carriers have responded by bolstering their fleet with extra loaders or activating dormant vessels. Moreover, such significant disruptions invariably precipitate a surge in prices. Carriers have resorted to implementing General Rate Increases (GRIs) and surcharges to offset the escalating costs associated with prolonged voyages. Maintaining schedules amidst the need for additional vessels translates to heightened expenses, encompassing fuel and operational costs. Consequently, rates have witnessed a notable uptick, particularly on routes connecting to North America, Europe, and the Mediterranean. Compounding these challenges are the soaring security concerns and the attendant rise in insurance premiums for vessels traversing the Red Sea. Insurance costs have ballooned, with premiums escalating by as much as 1% of vessel values, rendering the continuation of transits through the region more financially burdensome. As the industry navigates these turbulent waters, the timely sharing of information between competitors is imperative for individual carriers to adapt their operations and Land, sea and air Global politics continue to wield significant influence over the industry, necessitating greater knowledge sharing between stakeholders than ever before. Despite these challenges, the outlook for the industry is a positive one. 20 Áwww.blmforum.net Business Link 19 FREIGHT, STORAGE AND MOVEMENT © stock.adobe.com/AkuAkuNext >