We continue to live in some of the most turbulent economic times that the market has experienced, and the continuing austerity measures announced by George Osborne, will have as much of an impact on Liverpool and the regions as perhaps as in any other areas of the country.
However, Liverpool's commercial market has shown signs of activity over the course of 2012, giving rise to hope for the future in 2013.
As we end 2012 the number of recorded transactions in the central business district was at the same level at the end of the third quarter this year as for the whole of 2011. Bearing in mind that the market tends to rally in the last quarter, this would seem to create a decent platform for the office market going into 2013. Indeed, the level of take-up has just been improved by the largest letting of circa 23,000 sq ft to Tata and it is understood there are other deals in the pipeline, likely to ensure that take up will be in excess of 200,000 sq ft compared to the figures for 2011 of 270,000 sq ft, which included 94,000 sq ft to Weightmans.
Moving forward, there still seem to be a number of outstanding requirements which have been stalking the market for quite some period of time of areas in excess of 20,000 sq ft. This includes a mixture of financial, professional and office service providers. It is no coincidence that the vast majority of take-up has been in the better quality accommodation, notwithstanding the nature of some of the competitive deals that have been undertaken where landlords have been fighting for position. This, combined with the current lack of proposed office development in the pipeline, is likely to have an impact on the availability of Grade A and good quality Grade B accommodation moving through into 2013. Mann Island and 4 St Paul's Square are currently the only new office developments available to the market.
Traditionally, the market has relied very much on existing refurbished accommodation; however, it seems that the only major scheme on the stocks for 2013 is the refurbishment and rebranding of Mercury Court, 190,000 sq ft. Therefore, looking forward to 2013, I would see existing property owners or new developers looking to upgrade unlettable Grade D space, along with longstanding vacant Grade C accommodation which has previously been unrefurbished. This, however, may presuppose sourcing of residual funding through Regional Growth Fund or European Regional Development Fund. Indeed, signs of such an initiative recently emerged with the proposals for Churchill House by Capital & Centric.
There have also been one or two sales of office buildings and indeed, buildings which are known to be under offer, suggesting that developers and investors are prepared to commit themselves to becoming involved more actively in the market following recent years of stagnation.
In terms of rental levels, the market has been similarly stagnant over the past couple of years and while it may require further take-up of quality space to improve the levels, I nevertheless feel that there is the prospect of some minor growth and perhaps more importantly, a reduction in the unprecedented inducements that had been offered to occupiers in the marketplace over the last couple of years. Similarly, this may start to encourage the investment market where capital values have dropped sharply, particularly for buildings that are regarded as being secondary in the marketplace.
- Stuart Keppie, partner, Keppie Massie, commercial agents, Liverpool, and chairman of property group at Professional Liverpool