We caught up with one of our associates in our commercial transactional team, Gabriel Davies, based at our Liverpool office and Chair of Liverpool Office Agents Forum (LOAF), to learn more about why he thinks the second quarter of 2024 has been so challenging for the office market in Liverpool.
This past quarter has been particularly tough for Liverpool’s city centre office market. As a member of the Liverpool Office Agents Forum (LOAF), which includes property agents from across the city, I’ve seen firsthand how transactions have plummeted. In Q2, we only managed to complete 23,879 sq ft of transactions, a stark contrast to the buoyant 95,905 sq ft in Q1.
Currently, there’s about 900,000 sq ft of vacant office space in the city centre, but only 12% of that is Grade A, and a mere 7.75% is in the business district. This shortage of high-quality office space is a significant issue. The successful figures from Q1 and Q4 2023 masked the underlying problems we’re now facing.
While there has been some success with the gaming industry taking up office space and continued churn in the professional services sector, we’re stuck between a rock and a hard place. The lack of brand-new Grade A offices is negatively impacting the market. It’s not as simple as ‘build it and they will come’.
Without a sufficient headline rent to support speculative office development, we’ve seen stagnation in new office space, apart from a few refurbishment projects. Our low headline rent compared to other regional cities means developers are looking elsewhere, creating a cycle of low rent and limited new development.
There must be a reset in the market to break this cycle. Public and private sector partnerships could be the key to developing new offices. Without an appropriate headline rent to promote development, such partnerships could catalyse further development. We’ve seen a similar approach work in the Wirral, where public sector support has improved office stock quality, attracted new occupiers, and driven up rents.
Despite these challenges, I remain optimistic for the rest of 2024. I anticipate increased activity in the city centre, especially with the emergence of the gaming and creative sectors over the past year. The Liverpool City Region Combined Authority Corporate Plan aims to diversify the economy through strategic investments in health and life sciences, digital and creative industries, and advanced manufacturing.
This plan is crucial for ensuring inclusive economic growth for all 1.6 million residents, addressing long-standing inequalities, and enhancing access to education, employment, and skills development. These initiatives can help address the current issues with ageing office stock and attract new businesses or retain expanding companies looking for modern, adaptable spaces.
LOAF includes Fisher German, CBRE, Avison Young, Worthington Owen, Mason Owen, Keppie Massie, Mason Partners, Eddisons, Hitchcock Wright & Partners, LM6, SK Real Estate, and B1 Real Estate.
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