Signs of growth for UK Office Rents

31 August 2011

Incentives begin to harden according to Jones Lang LaSalle’s latest research.

Southampton, 12th July 2011 - From detailed analysis of 105 towns and cites in the UK, Jones Lang LaSalle’s latest research shows achievable office rents, the highest rent likely to be achieved in each location, have increased across more markets with 26% of centres monitored showing a year-on-year rise since March 2010. This compares with just 8% of markets in 2010 which experienced rental growth. Office rents have stabilised in over half of the property markets analysed including the major regional centres of Leeds and Liverpool where levels have remained unchanged since March 2010.

Jones Lang LaSalle’s 2011 survey shows that landlord’s incentives have stabilised in around 35% of the markets monitored and in a number of locations have begun to harden, with average rent free periods in Edinburgh, Newcastle, Bristol and Cambridge, amongst others falling. Despite this, substantial cost savings can still be obtained by occupiers in many regional centres. Year-on-year incentives are currently the most generous for office space in Doncaster, Middlesbrough and Hull.

Jason Webb, partner in Jones Lang LaSalle’s Southampton Office, said: “There are still significant opportunities for occupiers to obtain cost savings on the M27. However, the lack of speculative office development, which we are seeing across an increasing number of cities, means that the pipeline will remain severely limited and as Grade A supply reduces further, the window of opportunity for tenants is expected to close.”

Jones Lang LaSalle’s survey shows that year-on-year office rental growth since March 2010 was most marked in Glasgow (3.8%), Birmingham (3.6%) and Manchester (1.8%). In Birmingham, Manchester, Leeds, Edinburgh, Glasgow and the Western Corridor region, Jones Lang LaSalle expects to see an average of 0.7% rental growth in prime offices rents in 2011 however this is likely to be driven by the gradual erosion of Grade A space, rather than a significant bounce-back in occupier demand.

Jones Lang LaSalle’s research also shows that in around half of the office markets analysed, rent free periods are 24 months or longer. The most generous rent free periods can be found in the North West, where averages are around 30 months and the gap between headline achievable and net effective rents remains greatest in Scotland with average incentives in the region of around 24 months rent free.

For further information:

Contact: Lucy Richmond
Phone: +44 (0)7899891119
Email: Lucy.richmond@eu.jll.com