It has been a challenging quarter for Liverpool’s city centre office market, according to commercial property experts. Tony McDonough reports.
Gabriel Davies at Fisher German
There has been a considerable reduction in the number of commercial property transactions in the past six months, but expert pins hopes for an upturn on emerging businesses in the gaming and creative sectors.
Figures from the Liverpool Office Agents Forum (LOAF) highlight that only 23,879 sq ft of transactions were completed in Q2, a reduction from a buoyant 95,905 sq ft of space in Q1 this year.
But the news comes only months after agents Avison Young claimed Liverpool’s commercial district is “severely undersupplied”. They say a lack of good quality office space and delays to a major refurbishment project could make the situation worse.
LOAF is a consortium of property agents from across the city, including 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.
The findings also highlight that there is currently around 900,000 sq ft of vacant office space in the city centre. Only around 12% of that is Grade A and less than 8% is located in the city’s business district.
There has been no significant volumes of grade A space brought onto the market since the completion of the St Paul’s Square development more than a decade ago. Headline rents have also now been stuck at £25.50 per sq ft for more than a year.
Good quality refurbished space can help meet demand. The most significant project in recent months has been the upgrade of 50,000 sq ft of space 1 St Paul’s Square, overseen by CBRE.
There have also been refurbishments at No 10 and No 12 at Princes Dock and Liverpool Waters as well as work on No 1 Old Hall Street by Downing.
Gabriel Davies, Associate at Fisher German and Chair of LOAF, admitted this has been a very challenging quarter for the office market in Liverpool.
He said: “I think the successful figures for Q1 this year and Q4 in 2023 put a plaster over the issues we are now facing.
“There has been some reasonable success with the gaming industry taking up office space, and continued churn in the professional services sector, but we are stuck between a rock and a hard place.
“The lack of brand-new Grade A offices is having a negative impact on the market, however, it isn’t as simple as ‘build it and they will come’.
“Without having an underlying headline rent that allows for speculative office development, the city has seen a stagnation of new office space in the commercial district, apart from several refurbishment schemes.
“A low headline rent in comparison to other regional cities means developers are looking elsewhere, coupled with the fact that best in class offices drive a rental premium means we are caught in a cycle of low headline rent and a lack of new build development.
“There must be a reset in the market, otherwise the cycle will continue.
“Public and private sector partnership could result in the development of new offices. Without the luxury of an appropriate headline rent to promote development, a public and private sector partnership could be the catalyst for further development and to break the cycle.
“A similar approach could be taken to recent developments in the Wirral, where the public sector has assisted with the development of office space in conjunction with the private sector, be that assisting with funding or acting as a pre-let. That has led to improving the quality of the office stock, attracting new occupiers and driving up headline rents.”
But Gabe remains optimistic for the remainder of 2024 and anticipates an upturn in activity in the city centre despite his current concerns.
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“Several sectors have emerged over the past 12 months, notably the gaming and creative sectors which has been crucial,” he said.
“The Liverpool City Region Combined Authority Corporate Plan aims to continue diversifying its economy through strategic investments in health and life sciences, digital and creative industries, and advanced manufacturing which is really important.
“Central to the Corporate Plan is a vision of inclusivity, ensuring that all 1.6 million residents of the region benefit from economic growth.
“The plan emphasises the need to tackle long-standing inequalities and remove barriers to opportunity, with specific initiatives aimed at enhancing access to education, employment, and skills development, and this can only help the present issues surrounding the ageing office stock and attracting new businesses or retaining expanding companies that are looking for modern, large, adaptable spaces.”
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