Liverpool’s office market enjoys strong Q3 but occupier demand weakens

Latest Big Nine report from property consultancy Avison Young shows Sony’s move to Liverpool city centre was the biggest North West deal in July, August and September. Tony McDonough reports

Echo Place
Echo Place in Old Hall Street secured a 65,000 sq ft letting with Sony

 

Liverpool city centre’s office market saw the biggest letting in the North West in the third quarter of 2019 – but overall demand for space is weakening.

The latest Big Nine report from property consultancy Avison Young, a quarterly analysis of the leading UK office markets outside London, reveals that take up in Liverpool’s commercial district reached 150,000 sq ft in July, August and September.

This is 45% higher than the five yearly quarterly average of 103,195 sq ft and included digital giant Sony’s decision to relocate its operation from Wavertree to 65,000 sq ft of space across three floors at Echo Place in Old Hall Street.

Other significant deals that were completed during the period included Bibby Line Group taking 20,800 sq ft at Exchange Flags and Onward Housing committing to 20,000 sq ft across two floors at the Watson Building on Renshaw Street.

Avison Young is predicting a “strong finish” to the year with a number of other significant lettings set to complete by Christmas.

Falling demand

However, behind the positive headline figure is the revelation that demand for space in the  city centre has been falling in recent months. Liverpool is also suffering a chronic shortage of grade A accommodation with the newest space at No 4 St Paul’s Square and 20 Chapel Street, and this is disappearing fast.

Good quality refurbished space is coming to the market at Echo Place, the former home of the Liverpool Echo, and at the Royal Liver Building. And Liverpool City Council is backing a £200m scheme in Pall Mall, with Kier Property and CTP, and has secured planning consent for around 112,000 sq ft of office space.

READ MORE: Business district plan could deliver 2m sq ft of new office space

However, despite reporting “strong interest” from potential occupiers funding for the scheme has yet to be confirmed and the Big Nine report again highlights the main barrier to funding speculative office development in Liverpool’s commercial district.

The report again shows that Liverpool has the lowest headline rent of £21.50 per sq ft, way behind Manchester at £35 per sq ft and Edinburgh at £36 per sq ft. Low rents are a disincentive for investors as they will struggle to get a decent return.

Paddington Village
Image of ‘The Spine’, the new £35m headquarters in for the Royal College of Physicians

 

Economic uncertainty

Away from the commercial district, at Paddington Village in Liverpool’s Knowledge Quarter, construction of ‘The Spine’, a 160,000 sq ft scheme which is part pre-let to the Royal College of Physicians is due for completion in September 2020.

Ian Steele, principal at Avison Young’s Liverpool office, said: “After a relatively slow start to 2019, quarter three has finally seen the completion of a number of larger deals that had been in legals for an extended period of time.

“However, there has been a significant decrease in occupier demand over the past few months which is primarily down to the current economic uncertainty which has also resulted in occupiers becoming more cautious and delaying decisions on relocation.”

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