LEEDS CITY REGION SPRING 2020 - Carter Jonas
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LEEDS CITY REGION SPRING 2020
OUTLOOK SUMMARY DRIVERS OF
GROWTH
• L
eeds city centre saw strong office
take-up in 2019, set against the broader
• L
eeds is one of the UK’s key
backdrop of political and business commercial centres, with an office
uncertainty. The city’s economy will stock of over 20 million sq ft. It is
be boosted this year by the arrival of the commercial hub of the Leeds
significant, high-profile occupiers such as City Region with a diverse economic
• T
he Government’s announcement
Channel 4, HMRC, NHS Digital and Sky. base and a strong presence in sectors
that the HS2 high speed rail line will
such as financial and professional KEY ECONOMIC AND BUSINESS STATISTICS
• T
he severe shortage of grade A city go ahead in full is very welcome.
services, fintech, healthcare and Source: Experian, ONS, Land Registry, MHCLG, HESA
centre office space is constraining This will deliver a new connection
medical technology.
from Leeds city centre to locations
take-up, but developers remain reluctant YORKS &
• L
eeds City Region incorporates 10 including Sheffield, Birmingham LEEDS
to commence large schemes on a HUMBS
local authority districts, including key and London. The proposed station
speculative basis. With several sizeable
locations such as Wakefield, Bradford, will be integrated with the existing Growth – next 10 years
enquiries in the market we expect infrastructure, incorporating access Economic growth 16.1%
Harrogate and York. This area has a 19.6%
healthy take-up in 2020, with further to the city centre and the South Bank Employment growth 5.2% 2.0%
population of approaching 3.1 million,
pre-letting activity and more Population growth 4.8% 3.0%
which is projected to rise by around area, and acting as a catalyst for
refurbishments of existing buildings to 100,000 over the next decade. The further development.
grade A standard. total economic output of the Leeds Earnings and affordability
• T
he line to Leeds is part of the second Average house price
City Region was an estimated £68 £190,753 £168,382
• G
iven the lack of immediately available phase of HS2. This phase is to be Average house price growth, 2019 4.8% 3.9%
billion in 2019 (Experian), which Average house price to incomes
grade A office stock, we anticipate Leeds reviewed and combined with Northern 6.8 6.2
accounts for 57% of the total output for
prime rents to increase to £34.00 psf Powerhouse Rail, the proposed east-
the Yorkshire and the Humber region.
by the end of this year from the current west link from Liverpool to Leeds
Prosperity and productivity
• T
he city has a growing ‘knowledge’ via Bradford, and will be rebranded Average weekly earnings
benchmark of £30.00 psf. Out-of-town £534 £515
sector, boosted by the Innovation as ‘High Speed North’. This is an Unemployment rate (ILO) 4.4% 4.5%
rents will also face upward pressure GVA per worker
District, focussed around its leading important step, as improvements in 29,347 21,589
from the established £24.00 psf at
academic and teaching institutions connectivity between Leeds and other
Thorpe Park. cities in the Northern Powerhouse will
including the University of Leeds, Skills and Innovation
• Industrial occupier demand remains Leeds Beckett University, Leeds be key to future economic growth. % NVQ4 or above 38.2% 33.3%
Teaching Hospital Trust and Leeds Arts Students as % of population 6.9% 3.0%
resilient. The low number of big shed • L
ocal infrastructure improvements 4,065 23,405
Business births, 2018
deals in 2019 was largely the result of University. The media sector is now
are also important. Current schemes
becoming increasingly important, and
highly constrained supply, although include the Leeds East Orbital Road,
the arrival of Channel 4 last year should
wider business uncertainty is playing a which will replace the existing Outer
provide a catalyst for further demand.
part. In the medium term, supply should Ring Road, easing congestion but also
be addressed by new sites such as • L
eeds is also home to some of the UK’s acting as a catalyst for development.
premier retail space, including the 120- Completion is scheduled by the end
Gateway 45 coming forward.
unit Trinity Leeds, which transformed of 2021.
• C
ommercial property investment in the the city’s retail offer when it opened in
• T
he city region is also a strategic THE KEY LOGIC LEEDS AND GATEWAY 45
Leeds City Region totalled £1.3 billion 2013, and the Victoria Gate shopping SITES HAVE ATTRACTED AN IMPRESSIVE
distribution location and Leeds City
in 2019, up on 2018. With the greater centre, which opened in 2016 and is
Region Enterprise Zone is now a RANGE OF DISTRIBUTION OCCUPIERS
certainty provided by December’s anchored by John Lewis.
focus for development activity. This
decisive general election, we expect a • R
ail technology is a thriving sector. 142-hectare area is located at junction
higher level of prospective purchasers The Institute for High Speed Rail and 45 of the M1, along the new East Leeds • D
evelopment potential is not confined
this year and more competition for System Integration (IHSRSI), part of Link Road into Leeds city centre. A to Leeds. York, for example, could see
assets. However, for those buyers seeking the University of Leeds, will become simplified planning process applies significant development over the medium
good quality assets, the availability of fully operational in 2021. The region within the zone, and there is a range term at the 45-hectare mixed-use York Central
product will remain a key challenge is also home to the University of of business incentives. The area is regeneration scheme, with the potential to
across all sectors. Huddersfield’s Institute of Railway home to the key Logic Leeds and create over a million sq ft of commercial
Research. Although just outside the Gateway 45 sites and has attracted space. It has also been suggested that York is
• P
rime office and industrial yields should Leeds City Region boundary, Siemens an impressive range of occupiers under consideration to become the new home
remain at their current keen levels of has announced plans to develop a £6 including Amazon, FedEx, John Lewis, of the House of Lords, if radical proposals to
5.0% and 5.25% respectively in 2020. million rail innovation hub at Goole, and Premier Farnell. It is situated relocate from London were to go ahead. City
complementing its neighbouring rail within the wider Aire Valley Leeds of York Council is proposing to make the city
manufacturing facility. regeneration area, which contains over car-free by 2023, part of its goal for York to
400 hectares of development land. become a carbon-neutral city by 2030.
2 carterjonas.co.uk 3
OFFICE Take-Up phase of its new Temple district, a
38,000 sq ft speculative office building.
Figure 1 Leeds office take-up
Source: LOAF, Carter Jonas
MARKET • T
he Leeds office market saw total take-up of
just over a million sq ft in 2019, set against the
The Temple district will form a major
element of the South Bank area, with Annual take-up, sq ft
City centre Out of town
5-year average total take-up
10-year average total take-up
wider UK political and business uncertainty. over a million sq ft of offices, retail, food
1,400,000
This figure was almost identical to 2018, & beverage, a hotel, residential and
broadly in line with the average over the placemaking proposed on the 8.7-acre site.
previous five years, and well ahead of CEG has planning consent for an office 1,200,000
the average over the previous 10 years building of 134,612 sq ft, although this will
(870,000 sq ft pa). These trends are probably require a significant pre-let. 1,000,000
illustrated in Figure 1.
• M
cLaren Property has now received
• T
he 2019 figure was boosted by one large planning consent for its 330,000 sq ft 800,000
PRIME RENT deal, the 136,000 sq ft for occupation by scheme on Wellington Street, and is
£30.00 PSF Sky Betting & Gaming at 4 Wellington Place,
signed in the first half of the year. However,
hoping to commence construction later
this year, although this is also likely to
600,000
without this deal, take-up would still have require a significant pre-let.
2019 TAKE-UP been in line with the 10-year average.
• A
t Quarry Hill, Caddick Developments is
400,000
1 MILLION • D
emand was focused on the city centre, proposing over 100,000 sq ft of offices
SQ FT which accounted for over 70% of total lettings plus leisure, residential units, retail and 200,000
in 2019. At 745,000 sq ft, this was the third a car park, as well as placemaking at its
highest figure in the last decade, 12% over the Soyo scheme, and is already making 0
average for the previous five years, and a third significant progress.
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19
16
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15
12
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higher than the 10-year average.
• M
EPC has now received planning consent
• In contrast to the first half of the year, for the next phase of Wellington Place,
which saw the Sky deal plus a sizeable which could total over 800,000 sq ft of
71,300 sq ft taken by Link Asset Services, the office space.
DESPITE A SEVERE
SHORTAGE OF largest transaction in the second half was
• A
llied London has submitted a planning
GRADE A SPACE, only 31,175 sq ft, with Sky taking space at 26
application to repurpose the former
THERE IS HUGE Whitehall Road at a rent of £23.00 psf.
Alea casino at its mixed-use Leeds Dock
POTENTIAL FOR
DEVELOPMENT IN • A
nother key deal in H2 was Channel 4 taking scheme as flexible workspace. The project
THE MEDIUM TERM The Majestic on a 15-year lease, totalling will include a food & beverage element,
25,900 sq ft. Although Channel 4 will not plus events and leisure space. Leeds City
take occupation until Q2 2020, it already has Council is also marketing the international
significant staff numbers in place in short- swimming pool site. This is a high-profile
term accommodation. Also, consultancy firm gateway site for the west of the city centre,
BJSS agreed a 30,490 sq ft pre-let at L&G’s 1 with significant potential for office /
Whitehall Quay. mixed use.
• H
MRC / NHS Digital are also close to • D
espite the lack of supply and potential for
taking occupancy of their 370,000 sq ft at large-scale mixed-use schemes, developers
7–8 Wellington Place, which will be positive in remain reluctant to commence office space
driving footfall and further lettings at on a speculative basis, and pre-letting is
this location with over 4,000 staff due to take currently the only option for occupiers
up residency. with large grade A requirements. The lack
of quality supply means that landlords may
• T
he outlook for city centre take-up in 2020
take opportunities to refurbish existing
is positive, with some sizeable enquiries up
space to grade A standards.
to 100,000+ sq ft, but there remains a
severe shortage of immediately available • S
ome older office stock is being taken
grade A space. out of the market for other uses. For
example, Westgate Point has recently been
purchased by student accommodation
Future development provider YPP (although Weightmans, the
current occupier, has an unexpired lease
• L
eeds city centre has significant development term of circa four years). Also, Maple Grove
potential. There is a strong narrative around Developments and Rushbond are moving
the South Bank, with Commercial Estates forward with their redevelopment of Oak
Group (CEG) now on site with the initial House, where the remaining office leases
are due to expire imminently.
4 carterjonas.co.uk 5
INDUSTRIAL • O
ccupier demand in the industrial and
distribution sector remains resilient with a
MARKET healthy level of requirements. Whilst Leeds
take-up was down in 2019 compared with
the previous year, 2018 was exceptionally
strong, following two significant deals at Logic
Leeds. There were only two transactions over
100,000 sq ft in 2019; Torque leasing 215,000
sq ft in Wortley and ImerPlast occupying
115,500 sq ft in Castleford (both in the first
half of the year), and take-up was supported
by a high level of churn at the smaller end of
the market.
PRIME RENT
£6.75 PSF • T
he dearth of big shed deals is largely the
result of the highly constrained supply,
although wider business uncertainty doubtless
played a part. However, some speculative
distribution development is under way, for
example Total Park (over 250,000 sq ft
across seven units), due for completion early
this year.
WITH LIMITED
DEVELOPMENT THE • S
ome significant schemes did complete during
SUPPLY OF QUALITY 2019. These include 361,000 sq ft at Logic
SPACE WILL REMAIN Leeds, which was pre-let to Premier Farnell in
Rents The out of town market LIMITED THIS YEAR 2018; and 117,500 sq ft at TL1 and TL2, Cross
Green Industrial Estate, in addition to circa
• T
he prime city centre headline rent • W
ith occupier preferences shifting to city
220,000 sq ft across the rest of the market.
remained at its £30.00 psf level in 2019, centre locations, the Leeds out-of-town
with a rent-free period of 18 months typical market has had a quiet year, although it still • L
ooking to 2020, 472,000 sq ft is due to
(assuming a 10-year lease). However, given suits those occupiers who require excellent complete during the year, however 361,000
the lack of immediately available grade motorway connections. There were no large sq ft of this figure has already been pre-let to
A stock, continued healthy demand and transactions at the premier location of Thorpe Amazon at Logic Leeds in 2018, leaving very
several significant requirements, we expect Park, and take-up reached only 283,000 sq ft, little new space available.
the prime rent to see a marked upward shift the lowest since 2015, and below the average
• W
ith supply highly constrained, new sites will
this year. over the previous 10 years of 315,000 sq ft pa.
need to come forward. Gateway 45, located
• M
eanwhile, Wakefield has seen its first close to junction 45 of the M1, will be a major
significant deal for several years, with focus for future industrial and distribution
Figure 2 Leeds Prime office rents Highways England agreeing a 15-year pre-let development. This 165-acre site was recently
Source: Carter Jonas of 30,000 sq ft at Calder Park. The achieved purchased by Peel Logistics Property. The site
City centre
rent was £23.00 psf, which sets a new is also home to the Institute for High Speed
Prime headline rent, £ psf Out of town
benchmark for the city. The developer is Peel, Rail and System Integration, being progressed
35 with completion scheduled for early 2021. by The University of Leeds, which will be a
Carter Jonas advised Highways England. global leader for research in this area.
30 • U
K logistics has recently purchased 43 acres
• E
lsewhere in the Leeds City Region, the
York market continues to have a constrained of development land from Harworth/Evans
25 supply, although Palace Capital’s mixed-use with a view to bringing forward 850,000 sq
Hudson Quarter is under way and making ft of industrial and distribution units with
good progress to deliver 35,000 sq ft of office construction to commence in Summer 2020.
20
space, with completion scheduled towards
• T
he prime industrial rent in Leeds is £6.75 psf
the end of this year. Although no deals have
(units of over 10,000 sq ft).
15 yet been signed, there have been strong
expressions of interest.
10 • T
ake-up in York totalled approximately
70,000 sq ft in 2019. A pre-let of 4,588 sq
5 ft to Knights PLC has just been announced,
achieving a new headline rent in York of
£25.00 psf.
0
2015 2016 2017 2018 2019
6 carterjonas.co.uk 7
RETAIL • T
he Leeds city centre retail market has
held up well, despite slightly lower footfall,
MARKET particularly over the Christmas period,
which has been partly attributed to
major roadworks.
• T
he market has witnessed substantial
change over recent years, with the opening
of two new shopping centres in the prime
pitch where units were occupied relatively
quickly. Over the last year, vacancy rates
have increased a little, attributed to the
departure of some fashion retailers, but
PRIME RENT unlike many other major UK retail locations,
£250 PSF these vacancies are generally not being
(ZONE A) triggered by CVAs or retailers falling
into administration.
• In Leeds Trinity Shopping Centre, multiple
store openings were announced in 2019.
These include fashion retailer Realist and
Ribble Cycles bike store.
• O
utside of the city centre, to the east of
Leeds, The Springs retail park has welcomed
five new outlets – phone operator EE, The
Works craft shop, Shoe Zone, furniture shop
Lola Rose Interiors and Caffé Nero. The retail
park also saw the opening of Odeon Luxe
in 2019. Furthermore, The Range superstore
opened in the autumn in the former Toys R
Us unit at Birstall Shopping Park, creating
80 jobs and including a café and outdoor
garden centre.
• In the leisure market, proposals for the
205-bedroom Victoria Gate Hotel next to
the shopping centre were recommended
for approval in January 2020. The scheme
will provide welcome additional high-quality
rooms to the city centre.
• R
ents for prime retail pitches in the city
centre remain unchanged at £250 psf
(zone A) as at the end of 2019.
8 carterjonas.co.uk 9
COMMERCIAL • W
e have identified investment transactions
in Leeds City Region totalling £859 million
• T
he 2019 transaction total of £1.3 billion
was ahead of last year’s £1 billion. With the
• F
igure 3 illustrates the significant yield
compression that has occurred in recent years,
PROPERTY in the second half of 2019. This was greater certainty provided by December’s most notably in the industrial sector, but also
INVESTMENT
significantly higher than the H1 total of £402 decisive general election, we expect a higher for offices. Prime office and industrial yields
million, due to two standout deals. Both level of prospective purchasers this year and have remained at keen levels over the last year,
TRENDS were purchases in Leeds city centre by Legal
& General, who bought Quarry House from
more competition for assets. However, for
those buyers seeking good quality assets,
at 5.0% and 5.25% respectively. This reflects
robust investor demand, limited purchasing
R20 for £243 million; and 7–8 Wellington the availability of product will remain a key opportunities, and the strong occupational
Place (HMRC and NHS Digital’s pre-let challenge, with a lack of stock across all sectors. story, which will continue during 2020.
space) from Hermes REIM for £211 million.
These two purchases accounted for 53%
2019 TOTAL of the H2 investment total. Other
INVESTMENT significant transactions in the second half of
£1.3 BILLION 2019 included:
RENTS AND YIELDS SUMMARY
• uper G, at Glasshoughton near
S
Source: Carter Jonas
PRIME Castleford, was purchased by Equites
Property Fund (a South African REIT)
OFFICE YIELD for £30.675 million from Barwood RENTS YIELDS
5.0% Capital. The net initial yield was
4.6%. The 261,000 sq ft distribution PRIME CHANGE FORECAST CHANGE
warehouse, completed last year, is RENT OVER LAST NEXT 12 PRIME YIELD OVER LAST
(£ PSF) 12 MONTHS MONTHS 12 MONTHS
occupied by Puma on a 15-year lease.
• 1 City Walk was purchased by Corum Office £30.00 5.0%
Asset Management from Aviva for
just over £19 million. Occupiers at
this Leeds city centre office building Industrial £6.75 5.25%
include Harrison Goddard Foote, the
Insolvency Service and Jacobs. Retail (Zone A) £250 5.25%
• hornes Farm Business Park, to
T
WE EXPECT A the east of Leeds city centre, was
HIGHER LEVEL purchased by Citivale Ltd for £16.35
OF PROSPECTIVE
PURCHASERS THIS million from Aberdeen Standard at a
YEAR AND MORE net initial yield of 5.75%.
COMPETITION • hoton Park at the Normanton
P
FOR ASSETS
Industrial Estate was purchased by
Figure 3 Leeds – Prime yields
Citicentric on behalf of Adur District Source: Carter Jonas
Council for £15.1 million at a net initial
yield of 5.75%. The mixed office / Prime yield (%) Office Industrial Retail
industrial park is occupied by car 8.0
auctions company Aston Barclay. This
transaction is reflective of the recent
trend of Local Authorities targeting 7.0
acquisitions in underperforming or
secondary locations.
6.0
5.0
4.0
3.0
2.0
2012 2013 2014 2015 2016 2017 2018 2019
10 carterjonas.co.uk 11
THIS
PUBLICATION
IS PART OF OUR
COMMERCIAL
EDGE
RESEARCH
SERIES.
To read full property market insights for
our core commercial locations, visit
carterjonas.co.uk/commercialedge
ABOUT CARTER JONAS Contacts:
Carter Jonas LLP is a leading UK property Chris Hartnell Associate Partner
consultancy working across commercial property, 0113 203 1079 | chris.hartnell@carterjonas.co.uk
residential sales and lettings, rural, planning,
development and national infrastructure. Supported Scott Harkness Head of Commercial
by a national network of 33 offices and 800 020 7518 3236 | scott.harkness@carterjonas.co.uk
property professionals, our commercial team is
Daniel Francis Head of Research
renowned for their quality of service, expertise and
020 7518 3301 | daniel.francis@carterjonas.co.uk
the simply better advice they offer their clients.
Find out more at carterjonas.co.uk/commercial
0113 242 5155
9 Bond Court, Leeds LS1 2JZ
leeds@carterjonas.co.uk
© Carter Jonas 2020. The information given in this publication is
believed to be correct at the time of going to press. We do not
however accept any liability for any decisions taken following this
publication. We recommend that professional advice is taken.
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