Sheffield’s office occupier market continued its strong start to 2018 during the second quarter but the city is facing a severe shortage of grade A space as supply falls to a record low, according to research from national commercial property consultancy Lambert Smith Hampton (LSH).
LSH’s latest Sheffield Office Market Pulse revealed that combined take-up across the city centre and out-of-town markets reached 111,235 sq ft, up 18 per cent on Q1 2018 and 61 per cent on the same period in 2017.
Boosted by a handful of larger transactions, including South Yorkshire Housing Authority’s acquisition of 25,000 sq ft at Rockingham Court, TES Global’s 16,000 sq ft letting at 3 St Pauls Place and British Business Bank’s 10,000 sq ft letting at Steel City House, SMEs continue to underpin the market, accounting for two thirds of all activity.
The H1 total now stands at 205,186 sq ft and, with a number of other deals in legals, we anticipate that take up will exceed 350,000 sq ft for 2018. While this is a fraction short of 2017’s impressive total of 393,712 sq ft, it is mainly as a result of diminishing availability given the majority of Sheffield’s remaining grade A space is now either let or under offer, rather than lack of demand.
Overall supply continued its downward trend and there is currently just 80,000 sq ft of grade A space available in the city centre. With no new developments due to complete in the immediate future, larger occupiers will increasingly look to refurbishment schemes in order to satisfy their requirements.
Out-of-town, the refurbishment of space at Meadowhall Business Park has been vindicated, resulting in two new lettings although available space still remains in short supply due to little speculative development.
Following the new headline rent of £24.50 per sq ft set at Acero in Q1 2018, the scarcity of good quality space is likely to push up headline rental levels in the second half of the year to £25 per sq ft and there is evidence of landlords being able to stand firmer on incentive periods reflecting the lack of alternative options for occupiers.
Tom Burlaga, associate director at LSH Sheffield, said:“Following a solid start to 2018, Q2 has seen a continuation of strong occupier demand and there are a healthy number of enquiries in the pipeline heading into the second half of the year. This is likely to cause a serious issue in the short-medium term, as the market struggles to cater for larger requirements amidst a backdrop of dwindling grade A supply.
“It is crucial that potential development sites are brought forward as soon as practically possible to maintain momentum and to ensure that Sheffield does not miss out on the larger regional requirements.”