According to the Commercial Office Market Review, compiled by Liverpool BID Company and Professional Liverpool, the pandemic saw many office moves put on hold. Tony McDonough reports
New figures illustrate how Liverpool’s commercial office market was hit by the COVID-19 pandemic with take-up in 2020 down 50%.
According to the Commercial Office Market Review, compiled by Liverpool BID Company and Professional Liverpool, there were 130 office deals in the Liverpool city region, totalling 282,261 sq ft.
In the commercial district in Liverpool city centre, total office take-up was 142,030, down 58% compared with 2019. There were 73 transactions in the commercial district, compared with 84 in 2019.
During 2020 many office workers ended up working from home due to the pandemic and multiple lockdowns. This mean that a number of planned office moves were put on hold with the exception of those occupiers whose leases had come to and end.
How many office workers will eventually return and what future accommodation requirements will be is, as yet, unclear. In March Chris Renshaw, co-founder and director of Liverpool consultancy, The Momentum Group, told LBN it was possible some companies may need more space for the same staff given the ongoing need for social distancing.
The review reveals that it was the The sub 2,500 sq ft market that was responsible for most of the activity I 2020, representing 83.6% of all lettings. The average size of office space taken within the commercial district was 1,964 sq ft, just over half of the average deal in 2019.
The commercial district accounted for 50.3% of total take-up and 54.6% of the number of deals as flexible opportunities in the out of town markets were the focus of the occupiers since the outbreak of the pandemic.
This is also evidenced by the shift in sectors taking office space, showing which industries were able to take-up new premises. The public sector dropped to 12% in the Commercial District, 10% of the city centre.
The professional sector was the most active sector of the year, accounting for 35 deals at an average of 2,311 sq ft per letting. The creative/IT/media sector was the second most active sector of 2020 with 16 deals, accounting for 13.59% of the annual take-up.
There were more micro businesses from this sector going to commercial than city fringe, especially in quarters three and four.
Another sector which performed well across Liverpool city region in comparison to 2019, was health and life sciences, showing a 10.23% increase, driven by a number of transactions across multiple locations. Some examples of these being Spa Medica at Liverpool Innovation Park and NHS Property Services at Burlington House.
With the pipeline of grade A space in Liverpool’s commercial district still at a standstill, the emerging Paddington Village in the city’s £2bn Knowledge Quarter will be a significant alternative for occupiers looking for new office space.
Fit-out is under way at The Spine, a £35m, 200,000 office development in Paddington Village. The Royal College of Physicians has signed a lease to occupy 70,000 sq ft of space for its new northern headquarters.
Another floor will be occupied by the Clatterbridge Hospital Trust. Agent CBRE say there is strong interest in the remaining six floors. While it is expected health and life sciences would be the likeliest occupiers, the quality of space on offer may also catch the eye of firms in the professional sector.
There is also competition to attract occupiers coming from across the river. Work has started on the 25,000 sq ft Hythe, a speculative office development in Wirral Waters. It will offer grade A flexible office space. Peel L&P has secured £8.5m from Merseyside Pension Fund for the project and support from the Liverpool City Region Combined Authority.
And work on two office office buildings offering 190,000 sq ft of space is set to begin in Birkenhead this summer. They are being brought forward by Wirral Growth Company, a 50:50 joint venture between Wirral Council and Muse Developments.
There were no grade A transactions in Liverpool’s commercial district in 2020, with grade B / B* space accounting for all the transactions. Total office space available in Liverpool city region is 1,639,420 sq ft. Within the commercial district, available space stands at 495,206 sq ft.
Despite the contraction in take-up in 2020, occupiers have continued to seek out high quality opportunities with many landlords continuing to upgrade their offers across the region to cater for demand.
As such this has led to expediential rental growth for the past few years across all grades of offices. The highest rent achieved in 2020 was £28.50 per sq ft, a 14% increase from 2019.
Andrew Byrne, head of the property group at Professional Liverpool, said: “When we reset the clock on January 1 in 2020 we had much to look forward to. However, as a result of the COVID-19 pandemic, what we saw in 2020 was many occupiers choosing to take stock of the market and delay their occupational strategy.
“Despite having specific pandemic related challenges, the market is still dealing with the fundamental issues of previous years; a severe lack of grade A accommodation and limited good quality availability throughout all markets.”
There is some encouraging news from the latest footfall figures for Liverpool city centre. Liverpool BID Company which represents 1,500 businesses, recorded footfall of 163,344 on Monday this week, the first day when indoor hospitality was allowed.
This was lower than the opening up of outdoor hospitality in April, which saw a footfall of 193,000, but the following day’s figure of 162,124 wad the highest for a Tuesday since December 22 last year.
Julie Johnson chair of the Commercial District BID and BID Champion for the corporate sector, added: “From where we stand in spring 2021, we can speculate but we have no firm answers.
“We do know that the desire to rebuild and reinvigorate the city’s economy is ingrained within the Liverpool city region’s business community, and that ongoing developments, like those within the Knowledge Quarter will help to showcase the city’s excellent reputation in life sciences and health.
“Yet many investors will sit on their hands, even if just in the short term, and that illustrates the work that needs to be done to make Liverpool recovery ready. The need for Grade A office space within the Commercial District remains a significant threat to future growth, and with the SRF highlighting this core demand, there has to be a focus on this. “