The outlook in the office market in Sheffield is set to boom according to the findings of the Lambert Smith Hampton (LSH) ‘Weather Map’ report. Rents in Sheffield are predicted to rise by 18.9 per cent, the highest increase in the UK.
Current prime office rents in the city are £18.50 per sq ft, however this is set to increase to £22 per sq ft in 2007, as a result Sheffield shows the highest office market rental growth out of the 35 cities in the UK surveyed.
The LSH ‘Weather Map’ is published every six months and delivers a comprehensive assessment of what is happening in the UK commercial property rentals market. It provides information and predictions for 35 local markets and is based on data for the company’s own 30 offices throughout the UK and Ireland.
LSH predicts that new and emerging centres, including Sheffield and Doncaster will grow in importance, due to the continuing strength of the logistics sector’s demand for distribution space, which is driving up land prices in well established distribution locations, as well as planning restrictions and the shortage and high cost of labour.
The report highlights that rents in the industrial sector in Sheffield will grow by 4.8% well above the UK average. The retail market also has a fair outlook, with a 3.9% growth predicted seeing rents rise from £255 per sq ft to £265 over the next 12 months.
Across the UK as a whole, the report identifies the following key trends:
Office market – the office market is set to remain the leading sector led by economic growth and strong employment growth in the Financial and Business Service sectors. Occupier demands has picked up in the region and there is currently a shortage of Grade A space, reflected by limited new development activity. However, city centre office refurbishments are helping to plug this gap and developer interest is returning as the sector booms. Sheffield will see the highest UK rental increases in this sector.
Retail market – the slowdown in the consumer economy has limited growth and Sheffield’s retail rental market is however set to see above average growth. The recent interest rate rise will continue to keep consumer spending in check and the retail market is predicted to experience some challenges over the coming years. Internet sales have seen a five-fold increase since 2002 reaching a £49bn high and this is expected to double over this decade. This, combined with pressure from the expanding supermarket market will continue to impact on the high street retailer.
Industrial market – the industrial sector will see an uplift across the UK, with Sheffield experiencing an above average rental growth of 4.8% to a new 2007 high of around £5.50 per sq ft. Consumer spending continues to account for almost three quarters of total UK output and the shift to distribution is therefore set to continue unabated. The logistics sector will grow its £19 billion value by an estimated 2.5% with retail accounting for almost half of this. This will be a positive year for the industrial commercial property sector.
Guy Gilfillan, head of LSH’s Sheffield office, says: ‘The outlook is very bright across all sectors in Sheffield. The office market is set to see some of the fastest UK growth and the quality of the new developments coming onto the market is finally enabling the city to challenge is Leeds and Manchester neighbours as a top class business destination.
‘In the distribution sector, two of the UK’s largest ever industrial deals were in the region and this is a sign of things to come. Big sheds and distribution units of 20,000 to 50,000 sq ft are still in great demand and South Yorkshire is in a strong position to offer the development land, access to a workforce and easy transportation links to the ports and throughout the rest of the UK.
‘Although much of the interest is from retailers, the success of the Advanced Manufacturing Park is proving that there is growing demand for the revitalised manufacturing sector.’