GVA Grimley reports on Liverpool’s office market

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by Lin Freestone

In recognition of Liverpool’s year as European Capital of Culture, GVA Grimley has prepared a report on the state of the office market in the centre of the city. The report reflects on the office market in terms of take-up, supply, demand, rental growth and investment trends.

Despite the decline in the manufacturing sector in the North West, the region has continued to grow, buoyed by a strong finance and business services sector. Public sector offices have relocated to the region from the South East and a large proportion of office take-up has been from the public sector.

The government’s decentralisation programme plans to relocate many of its resources and offices, including 20,000 employees, from London and the South East to the North West by 2010.

The report shows that there is currently 9.3 million sq ft of office stock in Liverpool, of which 1.5 million sq ft is available - a vacancy rate of 16%. Only two new builds have available space, indicating that the majority of available space is either below Grade A, or refurbished.

By early 2008, office space under construction or being refurbished amounted to 616,000 sq ft. Of this, 39% has been pre-let. Development completions for 2008 are expected to total just over 420,000 sq ft, of which 30% has been pre-let. The majority of activity over the next two years will be refurbishments.

GVA Grimley’s Spring 2008 Office Market Commentary report shows that Grade A rental growth in the city’s prime office core had averaged 5.6% per annum between 2002 and 2005. In 2007, the figure was 1.8%.

Since 2002, Grade A rents have risen from approximately £16.50 per sq ft to an average of between £20 to £21 per sq ft. The rise in Grade A rents has encouraged developers to build to higher specifications, which in turn attracts blue chip tenants.

Comparisons are made with the situation in Manchester, highlighted in GVA Grimley’s Manchester City Centre Office Market Report published in Spring 2008. Grade A rents in Manchester currently average around £30 per sq ft.

GVA Grimley predicts growth in Liverpool’s rentals over the next three years despite the drag on the economy from the global credit crunch.