Office market trends and sustainability ambitions
Leeds saw two new starts in the office sector in 2022. This is under the Crane Survey average of 4.3. However, the volume of office floorspace under construction remains just as strong as in 2021, with 858,448 sq. ft currently under construction in the city. This shows a large-scale of development being retained and delivered across Leeds.
In addition, according to data from the Leeds Office Agents Forum (LOAF), office take-up remains strong despite national economic uncertainty, with Q4 of 2022 alone recording 201,321 sq. ft of take-up across 36 office deals, the strongest Q4 for five years and a 44% increase on Q4 figures year-on-year. This change in floorspace could be connected to recent trends of new roles for the office and overall office flexibility, as businesses consider hybrid ways of working in a post-pandemic world. Workers now have the option to choose from home working, at local community hubs (e.g., coffee shops.), on-demand event spaces, co-working spaces and more. Businesses will need to consider these options when acquiring office floorspace. Many are set to opt for a smaller ‘core’ office with greater amounts of amenity space, to accommodate more flexible ways of working.
The letting of 6 Queen Street to the Financial Conduct Authority, a new occupier for Leeds, was the largest Q3 city-centre deal. This new occupier will bring over 100 new jobs to the city and reinforces Leeds’ reputation as a hub of financial, digital and tech talent. Figures provided by LOAF note that ‘business and consumer services’ were the most active sector in office floorspace take up, accounting for 28% of total market activity. The Kalifa Review of UK Fintech (2021) indicates that Leeds City Region and Greater Manchester combined are the second largest hub in the UK for Fintech, with moves being made to establish Leeds as a place that supports innovative business and activities.
National companies continue to expand their presence within Leeds, further confirming the city’s growing profile as a centre for finance, digital and tech. The Bank of England has followed through on plans for a new Northern hub as part of a review of its geographical footprint across the UK, which comes following a Leeds staff expansion in Spring 2022. The Bank is set to continue recruiting ahead of the new Northern hub, with the exact city centre location yet to be announced. The hub will act as a continuation of the longstanding 200-year history between Leeds and the Bank of England. Elsewhere, Channel 4 has submitted a bold proposal to place Leeds at the forefront of its company growth, following the recent move of its national headquarters. This includes a further £100m into the 4Skills hub in Leeds, which helps provide a pathway for disadvantaged young people to enter the industry. In addition to this, a proposed expansion of the digital content team is expected to create 200 jobs in the city by 2024.
There is still much debate around the future role of the office, as Leeds continues to respond to changing demands and seeks to deliver offices that offer flexibility and ‘high-quality’ amenity space that meet sustainability targets.
Businesses are increasingly favouring amenity-led office spaces, with tenants migrating and relocating to the new city-centre offerings. Arup has confirmed the relocation of its Leeds base to landmark development, 11 & 12 Wellington Place, in 2023, expanding into 35,829 sq. ft of the office space. Like many of the emerging office developments across Leeds, 11 & 12 Wellington Place provides a host of amenity offerings, including ground floor commercial space and basement gym. Similarly, CEG’s Globe Point, completed in Q3 this year, also provides high-quality amenity space for tenants including spaces for yoga classes, business lounges, café and co-working zones.
The completion of Allied London’s refurbishment of the Old Alea Casino, known as Department, into a creative work, wellness and social destination will continue to support the reinvigoration of the Leeds Dock - it’s already home to Sky’s Digital and Technology Services Campus. Allied London has delivered a completely flexible workspace at the Dock which places amenities at the centre; a trend seen to be increasing in a post-pandemic market.
The delivery of amenity-rich office buildings will continue with the commencement of Aire Park Plot MUS3a and the future office pipeline. CEG’s One Globe Square, Latitude Yellow and 9 Wellington Place are all expected to start in 2023, all located in highly accessible areas within larger Masterplan schemes that promote sustainable travel and utilise the city’s transport improvements. Emerging Masterplan schemes such as Town Centre Securities’ and Glenbrook’s joint venture, Whitehall Riverside, will further add to the Grade A, amenity-rich office space being developed within the city. The office element of the Masterplan will add c.215,000 sq. ft of office floorspace to the city centre across two buildings, with c.8,000 sq. ft of commercial ground floor space provisioned. The scheme will be constructed within the city core, and will also provide an aparthotel, multi-storey car park, two-building residential scheme and a new public realm and landscaping proposal which will enhance the existing riverside environment with sustainable travel routes.
Leeds Office Agent Forum (LOAF) observed that occupier interests remain firmly centred on sustainability as the market continues to become increasingly ESG-focused, particularly for larger businesses. It is clear that demand continues to outstrip supply with regards to this. This is reflected in higher interest for developments with strong environmental credentials and sustainable benefits, with Grade A rents at £36 per sq. ft in Leeds City Centre. Two new office starts this year, Aire Park and West Village, are being developed with high sustainability credentials. West Village will be delivered to achieve net zero carbon in operation, as well as the new build elements being net zero in embodied carbon. This is being implemented through several initiatives, including careful materials choices, green walls and blue green roofs.
The demand for sustainable office developments can also be seen through office pre-lets, such as BREEAM Excellent rated City Square House. It’s set to be completed in late 2023 and has over 60% (83,131 sq. ft) of floorspace pre-let. Figures collated by LOAF show Grade A supply in Leeds City Centre is currently 806,000 sq. ft, but more than half of this total is still under construction, while the Grade A vacancy rate for built product is approximately 2.5% . This demonstrates that demand for these offerings continues to outstrip supply in the city.
Climate change is a core issue for the development industry as a whole. This is manifesting in Leeds through the growing appetite for refurbishment in the office sector, as well as through the growing flexibility and adaptability of new build offerings. As employers and tenants become increasingly aware of their carbon footprint, the demand for highly sustainable office spaces is expected to increase, with new-build and high-quality refurbishments poised to follow suit.
Leeds is taking steps to meet future sustainability goals through a number of public sector initiatives that are guiding developments across the city. The emerging Local Plan will further emphasise these goals. The first update focuses on planning policies that will help the council deliver its climate emergency commitments. Alongside the Local Plan, the Leeds’ Climate Commission’s Leeds Carbon Roadmap details the actions needed to achieve the city’s long-term vision of becoming carbon neutral by 2030. A Climate Action Plan has also been prepared by Climate Action Leeds. It aims to bring local communities and organisations together to transform Leeds into a zero carbon and nature-friendly city by the 2030s. The organisation has a £2.5m contribution from the National Lottery Climate Fund to help deliver this.
The Building for Tomorrow, Today SPD and Update Note (2020) has also helped to guide and achieve a strong portfolio of BREEAM Excellent and Very Good developments. The carbon neutrality goals of the city are also materialising in emerging developments, with Net Zero carbon office developments currently under construction. This follows the 2021 completion of Leeds’ first net zero carbon commercial building at Citu’s The Place within the Climate Innovation District.
While the Leeds office market continues to deliver innovative developments with net zero carbon status or BREEAM excellent, such as the recent completion of Globe Point in 2022, it should be noted that the residential market is typically not as far advanced. Although there are examples of sustainability-led residential developments in Leeds, with the award-winning City Climate Innovation District, more work must be done to democratise sustainable residential developments.