Office refurbishments set to lift average rents

Almost two-fifths (38%) of speculative office space delivered in UK regional cities over the next three years will be in the form of refurbishments, according to new research.

Data released by Savills has revealed that take-up of refurbished space accounted for as much as 25% of Grade-A transactions in Manchester during 2016 and is likely to increase in the next 12-18 months.

Refurbished rents in Bristol have increased by as much as 51% over the last five years from £18.50 per sq ft (£199 per sq m) in 2012 to £28 per sq ft (£301 per sq m) in 2017.

Similar figures have been seen in Leeds up to Q2 2017, when new-build rents jumped from £27.50 per sq ft (£296 per sq m) to £30 per sq ft (£323 per sq m).

Savills has noted a sustained level of demand for space in regional cities alongside an increasing lack of stock, which has influenced the demand for refurbished office buildings.

Jon Gardiner, head of national office agency, added: “It is widely accepted that the UK regions are currently at their lowest level of Grade-A availability on record, which has reduced the relative risk of refurbishment projects.

“In a time where returns will be income led, we are seeing more of a ‘flight to quality’ as landlords comprehensively refurbish secondary space in order to attract and retain tenants.

“This in turn maximises rental income, attracts better covenants and enhances the capital value and longevity of the asset.”

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