UK Regional Offices MarketBeat

KEY TAKEAWAYS FOR Q3 2024

• Economic Growth and Rate Cuts: The UK economy experienced strong growth in the first half of the year, with GDP rising by 0.5% in Q2 and the unemployment rate falling to 4.1%. The Bank of England cut the base rate from 5.25% to 5% in August, marking the first rate cut in four years.
• Occupancy Market Growth: Office space take-up in Central London and the 'Big Five' regions increased significantly in Q3 2024, with Grade A activity rising by 9%. However, there is a shortage of Grade A supply in regional areas, constraining take-up.
• Decreasing Availability and Vacancy Rates: Overall availability of office space decreased by 7% to 7.1 million sq ft, with vacancy rates at 9.0% in the regions and 9.3% in Central London. The development pipeline remains strong in the short term but looks constrained in the longer term.
• Rising Rents: Prime headline rents have increased by 4.3% over the past year, with significant upward pressure on rents in Central London. The 'flight to quality' towards Grade A space continues to drive rent increases.
• Investment Market Outlook: Investment volumes decreased in Q3, but the first rate cut in four years and stable yields suggest a potential uptick in investment activity. Yields in the West End and City markets remained stable, while regional yields moved inwards by 25 bps.