The Cost of UK Office Space

The demand for “best in class” offices, with green credentials and the latest amenities, looks set to continue in 2024 and beyond. 10 new office towers have been approved in the Square Mile alone, with more than five million sq ft of office space under construction and a further five million in the pipeline.

The London market has experienced a notable increase in prime rent over the last 12 months, with a limited supply of premium spaces driving the growth. Rental rates vary across each borough and region of the city as the cost of London office space can range from £35 per sq ft to £140 per sq ft depending on location.

Manchester’s increasing popularity led to record take-up figures in 2023, with 351,000 sq ft in the most recent quarter representing a 23% increase on the ten-year average, and an 8% increase quarter on quarter. Transactions on prime and Grade A space accounted for 52% of total take-up, highlighting the appetite for high-quality space. Overall, there is strong activity and a confident outlook for 2024, with top rent expected to reach £43.50 per sq ft.

There were a number of large deals throughout 2023 with Matillion’s new 28,000 sq ft office at Two New Bailey being one of the largest. Other significant deals for Pinset Masons and Arden University and UA92 made a combined contribution of over 100,000 sq ft to Manchester’s total.

Manchester is innovative, competitive and attractive to investors yet reasonably priced. There is a variety of tenants from companies with regional or global headquarters which include adidas, Siemens, Kellogg’s and Baker Tilly LLP.

The most popular areas to rent office space in Manchester are:

• Central Core
• Piccadilly
• Spinningfields
• Ancoats and Northern Quarter
• Salford Quays
• Media City
• Manchester Airport

Birmingham is one of three major UK cities to register prime rents above £40 per sq ft, which is a record rent for the city and displays its growing appeal to new businesses. In the city centre, prime rent currently sits at £41 per sq ft, and this is expected to reach £42.50 in 2024 based on the market’s growth over the past 12 months.

Grade A demand has accounted for 72% of take-up in the past five years and with new developments such as 10 Brindleyplace and St Philips Point leading the way for best-in-class space, we’re likely to see a continued trend of tenants taking prime space. There is an additional 464,000 sq ft available to let across under-construction schemes due to complete by 2025.

Its tenant profile varies from National Express, N Power, Deloitte, KPMG and Cadbury.

The most popular areas to rent office space in Birmingham are:

• Birmingham Central
• Digbeth
• Solihull
• Eastside
• Westside

Brighton is a lively city located on the south coast in the county of East Sussex well-known for its aura of creativity. The city is also recognised for its strong digital community and is also popular with science and environmental businesses due to its prime coastal location and access to natural assets.

The appeal of Brighton remains high with workers wanting to work in one of the happiest destinations in the UK. A fast-growing TMT sector is causing demand for space to outweigh current availability, with only c.10,000 sq ft of Grade A space available in the city which is not expected to stay available for long.

There is a lack of available Grade A space and available space in the Brighton market is predominantly Grade B which has limited appeal due to its lack of best-in-class appeal. There are currently two schemes in development (Middle Street and Portland), which would deliver 50,000 sq ft of space into the market. If demand remains high then £42 per sq ft is very possible in 2024 with rental fees already increasing c.4% year on year.

Brighton’s tenant profile includes American Express, Domestic & General, Higgidy Pies, Paxton Access, and Brand Watch.

The most popular areas to rent office space in Brighton are:

• City Centre
• North Laine
• South Laine

Despite the continued growth and development of businesses in the Tech and Creative sectors in Bristol, overall take-up in the city centre in the last quarter fell to 194,156 sq ft, a c.10% drop from the previous year. The out-of-town market was comparatively stronger for take-up, with total sq ft at 18% above the long-term average.

The city’s prime rent currently sits at £42.50 and has remained unchanged for the last 18 months. However, given the current availability rate of Grade A space (1.6%), headline rent growth is expected by the end of 2024 as the demand for best-in-class space continues.

There are several schemes due to complete in 2024 and 2025, including The Fairfax, Crescent, 3 Rivergate, The Welcome Building and One Temple Way, with only 14% of the 760,000 sq ft pipeline currently pre-let.

Diverse, prosperous, lively, and the largest city in the southwest of England, Bristol is the major importer of grain, timber, fresh produce and automotive vehicles into the UK. The city is also home to creative media, aerospace, electronics, IT, tourism, financial services and defence industries. Bristol is one of the largest centres for employment and education, with two universities providing a diverse talent pool to employers.

Bristol’s tenant profile varies from the Ministry of Defence, Airbus, Rolls Royce, Aviva, RAC and Hargreaves Lansdown.

The most popular areas to rent office space in Bristol are:

• Temple Meads
• Broadmead
• Clifton
• Aztec West

Cambridge is a hotbed for life sciences but as more investment has come into the city for these businesses, the provision of adequate office space has become scarce and nearly non-existent. The requirement for laboratory space is essential and many organisations have had to resort to custom-built facilities. The knock-on effect of this is being felt in the land value which is also competing with residential and medical development in the city. A 15-acre plot was sold to BioMed Realty for £140m which shows the huge demand and ever-growing value of land as a resource in Cambridge.

The 5-year development pipeline is projected to return nearly 5.7m sq ft of commercial space into the city, which, coupled with the long-term plan for new space and the new train station being developed in Cambridge North, suggests its an area for future growth and investment. Prime rent last year sat at £62.50 per sq ft, but given the potential shown by the market, this is expected to reach closer to £70 per sq ft in 2024, with lab rents following suit.

The most popular areas to rent office space in Cambridge are:

• City Centre
• Cambourne
• Cambridge Science Park

Leeds has become a stable location for commercial property with take-up totalling 994,618 sq ft over the past 12 months. The Professional Services, Financial and Government sectors were the most active over that period, with deals involving these sectors accounting for 68% of all take-up.

When compared to the other big nine markets, Leeds has recorded the strongest prime rental growth over the last five years. Prime rent currently sits at £37 per sq ft, reflecting an increase of 23% since 2019. This is expected to continue growing, with projections as high as £43.50 by the end of 2027.

The tenant mix in Leeds varies from Asda, Capita, Jet2, Sky and GHD.

The most popular areas to rent office space in Leeds are:

• Leeds Central
• Wellington Place
• Burley
• Beeston
• Pudsey
• Hunslet
• Thorpe Park
• Kirkstall Forge

Rental costs are considerably cheaper than in comparative cities such as Manchester. At the end of 2023, the average rent was recorded at £20 per sq ft with prime rent at £25.50 per sq ft. This positions Liverpool as a city filled with opportunities to develop more space and become a cost-effective option for new companies. The TMT and Government sectors were responsible for 72% of take-up in Liverpool over the last 12 months, with overall take-up in that period totalling 486,193 sq ft.

There is an increase in demand for space <5,000 sq ft in Liverpool which is driving activity in the market. Tenants are assessing how much space they need which is leading them away from the larger office spaces. There is still over 572,000 sq ft of available space in the city and there are new schemes in development, but they are not due for completion until 2025.

Its tenant mix varies from Jacobs Crackers, Unilever, Typhoo and The Very Group.

The most popular areas to rent office space in Liverpool are:

• City Centre
• St Paul’s
• The Docks
• Knowledge Quarter
• Wavertree Technology Park

Premium space is still in demand but this is currently undersupplied, with the availability rate for Grade A space at 1.4%. This has led to prime rental growth over the last 12 months which now sits at £32 per sq ft — up 14.3% from last year and 10.3% from the previous quarter.

Leases for Professional Services, Financial Services and Manufacturing totalled 51% of take-up in the city, while the new development at Bank House also saw two key deals signed at prime rent. This new office destination in Newcastle is part of the Pilgrim Place project which will provide over 400,000 sq ft of new offices.

Its tenant profile varies from Sage, Greggs, Virgin Money and Accenture.

The most popular areas to rent office space in Newcastle are:

• Quayside
• Grey Street
• Newcastle Helix
• Cobalt
• Quorum

Start-ups have also made Oxford their home in the bid to secure top talent from the city’s universities. The Biosciences and Pharmaceutical sectors are prominent in the city with four unicorn companies based there: Oxford Nanopore Technologies, Ceres Power Holdings, Adaptimmune and Exscientia.

Despite a lack of quality stock in the city, demand levels remained high in 2023 with Life Sciences contributing to a large percentage of transactions. The UK government’s Nuclear Decommissioning Authority 53,000 sq ft lease agreement in Oxford’s Harwell Science and Innovation Campus was the largest deal over the last 12 months, while prime rent is currently at around £65 per sq ft.

The most popular areas to rent office space in Oxford are:

• Oxford Science Park
• Oxford Business Park
• Bicester
• Abingdon

There is a clear distinction between tenant demands in the Reading property market with some tenants simply wanting cost-effective second-tier space. There is also a proportion of tenants who are seeking quality, premium space and are willing to pay top rent. There are now an increasing number of properties that are pushing boundaries on amenities and ESG credentials which can achieve rental fees above £40.00 per sq ft.

Reading has produced world-leading research in health, business, archaeology and climate change. The town is top for technology employment and boasts one of the highest densities of technology businesses across the UK. Reading has also flourished into a regional hub for business and financial services. Its tenant profile includes companies such as Microsoft, Vodafone, Oracle and Prudential.

The most desirable areas to rent office space in Reading are:

• Town Centre
• Green Park
• Thames Valley Park
• Caversham