property group
LIVERPOOL CITY REGION
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Liverpool office market take-up in the Commercial District, the city fringe and the out of town markets in 2014 was 563,034 sq ft, a 5.4% rise on 2013 and the highest since 2009.
Total Commercial District office take-up was 383,342 sq ft, an increase on the 2013 figure from 316,946 sq ft. The number of transactions increased from 108 in 2013 to 122 in 2014, the highest in 10 years.
The largest single deal was Liverpool City Council’s 85,000 sq ft take-up of space at the Cunard Building.
The professional sector was once again the largest in terms of take-up in 2014, with 127,377 sq ft in the Commercial District.
In total 297,530 sq ft of office take-up was in the Grade B and Grade B* categories, accounting for 77.6 % of all office take-up in 2014. This consolidates Grade B/B* space as the mainstay of the city centre market. Office take-up in the city fringe increased by 13.7% to 67,852 sq ft in 2014. 20,000 sq ft was the largest deal in the area, which was notable for the large number of non-categorised transactions.
Out of town office take-up in 2014 was 111,840 sq ft, a fall from 2013’s total of 157,474 sq ft. This can be attributed to a shortage of supply in key areas such as St Helens and Wavertree.
The total office stock in the Commercial District in 2014 was 6,784,971 sq ft, a decrease of 238,053 sq ft compared to 2013 and nearly 500,000 sq ft below 2012 office stock figures as supply continues to fall in the city centre. The sale of the Capital Building was the largest ever office investment transaction in Liverpool.
LIVERPOOL COMMERCIAL OFFICE MARKET REVIEW 2014
WELCOME... ...TO THE 10TH ANNIVERSARY OF THE COMMERCIAL OFFICE MARKET REVIEW FOR 2014
Once again, the report is the product of objective, independent analysis conducted through the member agents of the Property Group of Professional Liverpool.
STUART KEPPIE CHAIRMAN PROPERTY GROUP, PROFESSIONAL LIVERPOOL
It is 10 years since the review was initiated by the Merseyside Property Forum with the support of Liverpool Vision. Today, we are pleased to have been supported by the Commercial District BID and the Local Enterprise Partnership, not to mention the considerable input from Move Commercial. This year shows a remarkable increase of 21% on the number of transactions in the Commercial District over 2013 which was itself
an exceptional year. Again, the market has been dominated by the small sub 1,000 sq ft take-up but also shows an encouraging improvement for occupation over 2,500 sq ft, notwithstanding the lack of large deals in excess of 30,000 sq ft
To mark the 10th anniversary, the photograph below identifies those agents who have been most active in contributing to what has become the recognised source of analysis for the office market in Liverpool and its region.
We hope you find the review enlightening and informative.
L-R: Andrew Owen (Mason Owen), Andrew Byrne (CBRE), Brian Ricketts (Hitchcock Wright & Partners), Robert Diggle (ES Group), Jonathan Lowe (GVA), Nick Rice (Rice Consulting), Chris Hennessy (Matthews and Goodman), Tony Reed (Keppie Massie), Stuart Keppie (Keppie Massie and chairman of Property Group, Professional Liverpool), Paul Thorne (Mason Owen), Jon Swain (Mason and Partners), Neil Kirkham (CBRE) and Ian Steele (GVA)
OVERALL OFFICE TAKE-UP IN CITY REGION
Overall office take-up for the Liverpool City Region was 563,034 sq ft in 2014, a 5.4% rise on the 2013 figure of 534,100 sq ft.
600,000 500,000 400,000 300,000
2012
2013
563,034
2011
534,100
2010
534,750
0
382,592
100,000
393,441
200,000
2014
The combined figure includes the Commercial District, city fringe and out of town markets including Knowsley, St Helens, South Liverpool, Wavertree, North Liverpool, Bootle/Waterloo. The rise in overall take-up is dominated by the Commercial District, particularly the city council’s occupation of the Cunard Building, while the out of town market’s largest deal was Alfred Knight’s occupation of Pegasus House in Knowsley.
OFFICE TAKE-UP IN COMMERCIAL DISTRICT
Total office take-up in the Commercial District in 2014 was 383,342 sq ft. This is significantly higher (21%) than 2013, when take-up was 316,946 sq ft, and 47.7% higher than in 2012, when take-up was just 259,602 sq ft.
450,000 400,000
350,000
300,000
250,000
200,000
Cotton Exchange
2011
2012
2013
383,342
2010
316,964
0
259,602
50,000
268,298
100,000
207,515
150,000
2014
It is a popular belief that the public sector supports much of Liverpool’s office take-up. While that has not been the case in recent years, in 2014 take-up in the sector was nearly one third of all office take-up in the Commercial District. This was due to Liverpool City Council’s occupation of 85,000 sq ft of space at the Cunard Building following its £11m acquisition.
The Cunard Building was the year’s major deal, maintaining the trend of one single major deal in a 12 month period and supporting – or skewing – overall take-up. In comparison, the next largest office deal in the Commercial District was Mercer’s move into 22,210 sq ft at 4 St Paul’s Square.
69% of transactions and area take-up occurred in the Commercial District.
Overall office take-up is significantly up on the low point in 2011 of 382,592 sq ft, showing greater confidence in the market, and improved activity by indigenous occupiers.
Sub 1,000 sq ft take-up was once again the main driver with over 50% of all transactions, a rise of 12% on 2013 from 108 in 2013 to 121 in 2014. This, significantly, shows almost a threefold increase on just 44 transactions in 2011 and demonstrates the market’s response to an increase in supply of small offices. Indeed, 2014 saw more buildings and large floor plates converted into smaller offices than in recent years. Two notably successful city centre schemes were, Cotton Exchange and No 1 Old Hall Street, securing 38 and 11 deals respectively.
Office take-up in 2014 was notable for the large number of deals taking place in the final two months of the year. In total there were 23 deals in November and 22 in December – nearly half of all of the deals in 2014.
BY GRADE OF OFFICE – COMMERCIAL DISTRICT
In 2014 there were a large number of smaller deals in the Grade B category in the Commercial District as 53 separate Grade B office deals were for suites of below 1,000 sq ft, however 85,000 sq ft was taken by Liverpool City Council at the Cunard Building to nearly double the Grade B office take-up figure.
GRADE A GRADE B* GRADE B GRADE C
14% 28% 50% 8%
Total: 383,342 sq ft
In total 192,467 sq ft of office space take-up was in the Grade B category and, along with 105,063 sq ft of office space in the Grade B* category, this makes up 77.6% of all office takeup in 2014. This cements Grade B/B* space as the mainstay of the Commercial District.
Once again smaller lettings have dominated the Commercial District market, as 50% of all lettings (61 deals in total) were under 1,000 sq ft during 2014. When combined with lettings below 2,500 sq ft this represents 73% of all deals in the city.
There were 19 transactions over 5,000 sq ft in 2014, almost double that for 2013, and a huge 50% 23% 12% 8% 5% 2%
level of supply available to occupiers may be considered to be a contributory factor the comparative lack of larger deals and the highly competitive cost effective nature of the Grade B* space has had an impact. There were four Grade A office deals; Mercer took 22,210 sq ft and GVA took 3,542 sq ft at 4 St Paul’s Square, whilst Seadrill and WP Thompson took around 10,000 sq ft each at Mann Island to complete the Grade A take-up in the Commercial District.
Meanwhile, Grade C recorded a take-up of just 31,197 sq ft, representing 8%.
Grade A take-up was 54,615 sq ft, which is just 14.25% of total office take-up. Whilst the low
BY SIZE OF OCCUPIER - COMMERCIAL DISTRICT
< 1000 SQ FT 1,001 - 2,500 2,501 - 5,000 5,001 - 10,000 10,001 - 20,000 > 20,000
LIVERPOOL COMMERCIAL OFFICE MARKET REVIEW 2014
jump in deals between 10,000 to 20,000 sq ft in the Commercial District. The largest deal (Liverpool City Council) of 85,000 sq ft also eclipsed that of 68,000 sq ft in 2013. The improved consistency in the range of transactions suggests a more balanced local economy than in 2013.
“Smaller lettings have dominated the Commercial District market, as 50% of all lettings were under 1,000 sq ft during 2014.”
Total: 383,342 sq ft
OFFICE SUPPLY IN COMMERCIAL DISTRICT
The total office stock in the Commercial District in 2014 was 6,784,971 sq ft, a decrease of 238,053 sq ft compared to 2013 and nearly 500,000 sq ft below 2012 office stock figures as supply continues to fall in the city centre.
GRADE A GRADE B* GRADE B GRADE C GRADE D
5.8% 22.7% 13.5% 36.1% 21.9%
Total: 2,046,255 sq ft
It is a similar story with available vacant office space. There is in total 2,046,255 sq ft of office space available in the Commercial District compared to 2,295,053 sq ft in 2013 and 2,438,940 sq ft in 2012. 58% is currently in the poorer quality Grade C & D categories The decreasing supply can be attributed to an increasing number of building uses being converted from offices to hotels, apartments and residential including 2 Moorfields, 33-37 Dale Street and Wellington Buildings. Meanwhile, there is a lack of new build activity in the Liverpool office market and this has
further restricted supply.
There is just 119,138 sq ft of vacant Grade A office space in the Commercial District, more than half the space available in 2011. This represents just 5.8% of available office stock in 2014, down from 7% in 2013. If this trend continues the Grade A space will be exhausted within two years as there is no new build Grade A office space in planning, with the exception of Peel’s Liverpool Waters scheme. The dwindling supply will be further exacerbated by 4 St Paul’s Square and Mann Island moving out of the Grade A category in 2016 and re-graded.
Supply availability in the Grade B* (higher quality refurbished and modern offices) and Grade B (refurbished) was 463,531 sq ft and 275,662 sq ft respectively, accounting for 36% of the total vacancy rate.
CITY FRINGE TAKE-UP 80,000 70,000
+ 13%
60,000
50,000
2013
67,852
0
59,662
30,000
10,000
2014
OUT OF TOWN TAKE-UP
SOUTH LIVERPOOL WAVERTREE KNOWSLEY NORTH LIVERPOOL BOOTLE ST HELENS
Total: 111,849 sq ft
The three deals took place in the Ropewalks area but the eclectic nature of the city fringe area, which includes the area surrounding the universities, docklands and the Baltic Triangle, accounts for a variety of transactions of less orthodox users across the occupier sectors.
Out of town office take-up in 2014 was 111,840 sq ft. The figure is lower than 2013’s total of 157,474 sq ft but remains significantly higher than a low of 63,684 sq ft in 2011.
There was better news in other out of town markets with South Liverpool achieving takeup of 37,301 sq ft, and a resurgent Knowsley, which recorded 38,712 sq ft of deals in 2014 compared to just 20,519 sq ft in 2013. Knowsley was home to the largest out of town letting deal outside of the city fringe, with Alfred Knight taking 31,468 sq ft at Pegasus House in August 2014. This deal eclipsed Amey’s 16,000 sq ft letting at the Matchworks building in South Liverpool.
The three major deals in the city fringe were Atlantic Container Line (ACL) occupying 20,000 sq ft at 60 Duke Street, supported by contractor Wates Construction’s double letting of 6,220 sq ft at the nearby 110 Duke Street and The Foundry buildings, and LCH taking 12,421 sq ft at 10 Hanover Street.
40,000
20,000
Take-up in the city fringe area was 67,852 sq ft in 2014. This represents an increase of 13.7% compared to 59,662 sq ft in 2013. It continued to exceed the other out of town areas and is more than double the next closest area, Knowsley.
33% 8% 36% 22% 0% 1%
The fall in take-up can be attributed to lower take-up in Wavertree, where deals totalling 9,311 sq ft in 2014 compares to 40,553 sq ft in 2013(which was an exceptional year for Wavertree) and St Helens, where the market has reached saturation point and a lack of supply saw take-up drop from 26,403 sq ft in 2013 to just 1,229 sq ft in 2014. Meanwhile, Bootle and Waterloo had a single letting of just 454 sq ft compared to 14,982 sq ft of take-up in 2013.
North Liverpool also bounced back from recording no deals in 2013 with four lettings totalling 24,833 sq ft including a 15,570 sq ft letting to Autism Initiatives in Assist House.
TAKE UP BY GRADE OF OFFICE – CITY FRINGE AND OUT OF TOWN A dwindling supply of available Grade A space in the out of town areas mirrors the trend experienced by the Commercial District, where Grade A take-up was just 28,469 sq ft. In fact, Grade A take-up in South Liverpool, Wavertree, Knowsley, Bootle/Waterloo and St Helens was zero in 2014.
GRADE A GRADE B GRADE C
16% 68% 16%
Total: 179,692 sq ft
28,469 121,783 29,440
ACL’s 20,000 sq ft occupation of 60 Duke Street and two sub-2,500 sq ft lettings at the Innovation Centre 3 by Karm Research Group and Ryder Architecture Limited ensured 23,000 sq ft of space was let in the city fringe.
Turtlewax’s letting in Alaska House (North Liverpool) , totalling 4,969 sq ft, was the only Grade A deal outside the confines of the city fringe
Grade B take-up, in common with the Commercial District, is the main driver behind city fringe and out of town office deals with 121,783 sq ft let in 2014, making up two thirds of all deals. Grade C take-up was 29,440 sq ft which, although less than the Commercial District, was double the proportion at 16.4%.
“Grade B take-up, in common with the Commercial District, is the main driver behind city fringe and out of town office deals, making up two thirds of all deals.”
TAKE-UP BY SECTOR
PUBLIC SECTOR PROFESSIONAL FINANCIAL / BANKING TRAINING CREATIVE / IT / MEDIA DISTRIBUTION / SHIPPING OUTSOURCING / CALL CENTRE OTHER Total: 117,482 sq ft
PUBLIC SECTOR PROFESSIONAL TRAINING CREATIVE / IT / MEDIA OTHER *FINANCIAL / BANKING Total: 67,852 sq ft
PUBLIC SECTOR PROFESSIONAL FINANCIAL / BANKING CREATIVE / IT / MEDIA OTHER *TRAINING
Total: 111,840 sq ft
31% 33% 8% 5% 2% 6% 1% 14%
LIVERPOOL COMMERCIAL OFFICE MARKET REVIEW 2014
COMMERCIAL DISTRICT
Almost one third (30.7%) of all transactions in the city centre was from the public sector, totalling 117,482 sq ft, compared to 11.3% in 2013. This was mainly due to Liverpool City Council taking 85,000 sq ft and relocating from other city centre buildings.
There were 38 deals in the professional sector totalling 127,327 sq ft of space, making it the most active sector in 2014. The sector accounted for 33% of all deals and while this is down on the 47% share in 2013, that figure was distorted by the single 68,000 sq ft letting
CITY FRINGE
18% 17% 2% 9% 54% 0%
The biggest deal in the city fringe market, ACL’s 20,000 sq ft letting in a new build office at 60 Duke Street, means the shipping and distribution sector dominated the market. However, the eclectic make up of office supply in the city fringe means that the category ’other’ sector accounts for over 50% of all office takeup demonstrating the wide range of unorthodox user types in the city fringe. The Baltic Triangle is a case in point.
Public sector and professional sectors were active in the city fringe with 12,421 sq ft and
OUT OF TOWN
22% 47% 5% 3% 23% 0%
In the out of town market professional take-up was 52,009 sq ft, which is nearly half of the total 111,840 sq ft take-up. This was split between Knowsley and South Liverpool predominantly, which recorded 31,468 sq ft and 17,215 sq ft of deals respectively.
The Knowsley take-up in the professional sector was through a single 31,468 sq ft deal; Alfred Knight’s occupation of Pegasus House. Meanwhile Amey at the Matchworks (16,000 sq ft) and Andromeda Engineering (1,215), one Pegasus House
at Edward Pavilion by solicitors, Hampson Hughes.
The other sectors, including creative, training and call centre/outsourcing all had minimal impact with less than 10% of take-up each. However, Seadrill’s 10,800 sq ft letting at 1 Mann Island helped the shipping and distribution sector double its share of deals with 6.3%.
11,266 sq ft respectively. The 12,421 sq ft letting of 10 Hanover Street by LCH Trust was the only deal in the public sector category, while five smaller deals boosted the professional sector.
However, the creative sector was only 6,158 sq ft as more small office space becomes available in the better connected city centre area, despite the enduring popularity of small business hubs such as Ropewalks and Baltic Triangle.
of four deals at Hurricane Court in 2014, made up the South Liverpool professional sector figure.
Public sector take-up was 24,980 sq ft, of which 15,570 sq ft was through Autism Initiatives’ occupation of Assist House in North Liverpool. There was also a small improvement in the financial and banking sector to 6,100 sq ft (5% of the total) in out of town markets.
OFFICE SUPPLY CITY FRINGE AND OUT OF TOWN
There is 1,400,517 sq ft of vacant office supply in the city fringe and out of town markets in 2014 compared to 1,534,171 sq ft in 2013. This reflects the static supply line in relation to take-up.
SOUTH LIVERPOOL WAVERTREE KNOWSLEY NORTH LIVERPOOL BOOTLE / WATERLOO CITY FRINGE ST HELENS
TOTAL: 1,400,517 SQ FT
12% 22% 8% 6% 16% 33% 3%
Capital Building
There is now 178,493 sq ft of Grade A space available in the city fringe and out of town markets compared to 431,950sq ft in 2011. South Liverpool has the most Grade A space available with 80,750 sq ft, compared to 86,356 sq ft of Grade B space. North Liverpool shows a similar balance with 32,883 sq ft of Grade A and 34,983 sq ft of Grade B space. The city fringe is less balanced with 42,104 sq
RENTAL VALUES
Rental levels have remained remarkably consistent to the previous three years with headline rents at £21 per sq ft for Grade A space within the Commercial District and Grade B* achieving £17 per sq ft. However, the greater weight of higher level deals shows a consolidation of rental levels compared to 2013.
As in 2013 out of town rents plateaued in 2014 with typical rents of below £11 per sq ft, although significantly, there were hardly any Grade A deals.
BILL ADDY CHIEF EXECUTIVE OF LIVERPOOL BID COMPANY
“The office market review is the authorative source of information on the state of the city’s office base. In the last 10 years we have seen a remarkable turnaround in the commercial offer of the city and it is essential that we continue to reflect that through this publication. The Commercial District BID is pleased to continue our sponsorship and looks forward to the future and the continuing growth and strengthening of the Liverpool office market.”
ACCREDITATION
This report has been compiled by members of the Property Group of Professional Liverpool with assistance from the Commercial District BID and the Local Enterprise Partnership, and is produced by Move Commercial.
OUR SPECIAL THANKS GO TO...
NOTE ON TERMINOLOGY
ft of Grade A space outweighed by 292,024 sq ft of Grade B space.
Knowsley and St Helens saw the last of the Grade A stock taken up in 2014 as supply reached zero, while Wavertree has just 14,100 sq ft and Bootle/Waterloo has 8,656 sq ft available.
Wavertree has the most available Grade C space with 234,272 sq ft, followed by Bootle/Waterloo (174,961 sq ft) and city fringe (136,847 sq ft), highlighting the ageing stock in some out of town markets.
BUILDING TRANSACTIONS
There has been an uplift in the number of building transactions the most significant being the investment sale of Liverpool’s largest office, The Capital Building, towards the end of the year for £55m and NYI of 9.1%. Imperial Court on Exchange Street was the second biggest transaction. Others of note in the city included, 2 Moorfields, 33-37 Dale Street and Cavern Court, all of which were substantially vacant with proposals for alternative uses for the office content. The two notable sales in the city fringe and out of town markets were ACL at 60 Duke Street and Alfred Knight in Knowsley respectively.
ROBERT HOUGH CHAIR OF THE LIVERPOOL CITY REGION LOCAL ENTERPRISE PARTNERSHIP
“The city centre is a key element in the city region’s Growth Strategy which will create multiple job opportunities and boost growth, and as such, is a central part of our Growth Deal agreed with government. This office market review offers an informed and valuable insight into the performance of the city centre and further afield, and we are pleased to be supporting this 10th anniversary.”
For the purposes of this research, Grade A space was defined as office space completed since 1st January 2010; Grade B space as office space completed before 1st January 2010 or other accommodation recently refurbished or due to be refurbished. Grade B* is higher specification including air conditioning and raised floors. Grade C as unrefurbished but ready for occupation. Grade D is office space which could not be occupied without substantial refurbishment, and where no plans exist for such refurbishment.