Despite political and economic concerns weighing on decision-making last year, several major occupiers – seemingly confident of better times ahead – pressed the button on big lettings. More clarity around pricing and higher yields meanwhile encouraged investment, with buyers increasingly willing to dip their toes into previously out-of-favour sectors and markets.
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In the office sector Oxford and Cambridge continued to outperform the more traditional office markets with their life science and technology focus underpinning relatively strong demand and limited upward vacancy movement. At the other end of the spectrum is London, where a combination of negative net absorption and three million square feet of supply additions over the past 12 months has pushed vacancies into double digits.
But it is a mixed picture in the capital. Demand has rebounded in traditional heartlands in the City and parts of the West End like Mayfair and St James’s. But more peripheral submarkets, particularly those in the west, have continued to struggle. Vacancies in Hounslow West, Hammersmith and Ealing are nearing 20%.
While a familiar story played out in the industrial sector last year, with Midlands markets such as Northampton and Coventry benefiting from a flight to prime, well-connected distribution locations, a handful of other themes emerged. Of particular note was the strength of tenant demand for warehouses in Glasgow and Edinburgh. The vacancy rate along the M8 corridor, which connects the two cities, sits at a record low, less than 2%.
Scotland’s markets also fared well in the hotel sector, thanks to international travel demand and busy event calendars. Newcastle was another strong performer as improved corporate trade and major events helped drive some of the strongest revenue per available room growth in the country. Liverpool normalised, however, following its Eurovision and Open Championship-driven boost a year earlier.
Several of the UK’s smaller markets stood out in the retail rankings. Demand from leisure and fitness operators supported take-up and above-average net absorption in Nottingham, Tees Valley & Durham and Hertfordshire. Bristol was another standout performer, aided by relatively low and stable vacancies. While most larger retail markets ranked relatively well on at least one metric, Cardiff and Newcastle fared poorly across the board as shop closures continued to outweigh new openings.
In the investment market, Aberdeen was a highlight. Recent price falls reignited investor demand for office and retail buildings in the Granite City, sending volumes to their highest level in five and 11 years, respectively. The sale of the Bluewater shopping centre meanwhile pushed retail volumes in second place Kent to a three-year high. Weak investor appetite for secondary offices contributed to Lancashire’s bottom ranking.