New figures from property consultancy Avison Young show take-up in Liverpool’s office market has nosedived amid the coronavirus lockdown. Tony McDonough reports
Overall take-up of space in Liverpool’s office market was 50% lower than the 10-year quarterly average in the first three months of 2020, new data shows.
Large sections of the UK economy have slowed down or ground to a halt due to the coronavirus and the subsequent lockdown introduced on March 23. And figures from property consultancy Avison Young’s latest Big Nine report show it has has a severe impact on Liverpool’s office market.
The city saw a relatively strong start to the year, with the majority of the estimated 50,000 sq ft of deals in the city centre taking place within the first two months of 2020. However, March saw a marked slowdown as the epidemic hit the economy hard.
Law firm Carpenters at No 1 Tithebarn and Plus Dane Group at Atlantic Pavilion were the two largest deals of the quarter, taking 16,017 sq ft and 15,000 sq ft respectively.
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According to the Big Nine, which examines office take up and investment volumes across the UK’s nine largest cities outside of London, occupier sentiment was more positive in Liverpool at the start of the year, with a healthy number of large requirements in excess of 10,000 sq ft in the market.
These included BT (100,000 sq ft), MAERSK (15,000 sq ft) and Firesprite (20,000 sq ft), all of whom were actively seeking to acquire space or agree pre-let’s during the latter part of this year. However, occupational demand has significantly diminished since Covid-19 put the UK on lockdown and this is expected to have a substantial impact on deals in Q2 and Q3 of 2020.
At the beginning of March, Professional Liverpool and Liverpool BID Company published its Office Market Review for 2019 which reported that available space in the city’s commercial district contracted by 33% during the year, with the accommodation pipeline hitting and all-time low.
Agents were hoping the big requirements in the market would help push up Liverpool’s grade A rents to a level that would make speculative development more viable. They hoped it would spur development of the proposed new schemes at Pall Mall and Liverpool Waters.
However, despite grade A space due to become available at The Spine in Paddington Village in autumn 2020, it adds a high degree of uncertainty to the market in the medium term.
Principal within Avison Young’s Liverpool office, Ian Steele, said: “It was no great surprise to see a slow-down in transactional activity towards the end of Q1 due to the direct impact of the coronavirus crisis. The majority of occupiers are adopting a cautious approach which is likely to result in requirements and relocations either being delayed or put on hold indefinitely.
“When the market does start to recover though, one of the biggest challenges that Liverpool faces is supply, with available office space now at its lowest level for 20 years. There are currently no new schemes under construction in the out-of-town markets, and only The Spine on site in the city centre, approximately 50% of which is pre-committed.
“Developers are likely to require a significant level of pre-commitment from occupiers before bringing any future new schemes forward and that will be a huge challenge given the uncertain economic position we currently face.”
In the investment market, Liverpool landed the largest inward investment deal of the quarter across the nine cities with Square Ape’s £40m purchase of 20 Chapel Street from British Airways Pension Fund.