Market Commentary

As many economic commentators have said recently, we live in interesting and in many respects, unchartered times, for this reason it is a difficult time to be predicating future property market trends and the changing demands being placed upon those responsible for corporate real estate decisions.

Renewed global economic turbulence generated in large part by sovereign debt problems in the Eurozone continue to impact the corporate environment making occupiers reluctant to take relocation decisions.

However, there are signs of more optimism within the commercial property sector with Leeds as a regional centre showing positive signs of this more optimistic outlook.

For example, take up for 2011 for Leeds City Centre offices was just below 400,000 sq ft, a dramatic improvement from the 2010 level of 280,000 sq ft against this background, some limited development activity has re-emerged, there are some speculative schemes being looked at again. With the lack of development activity over the last 3 years, there is a generally held view that the City will see a shortage of quality Grade A space over the next year or two.

Leeds remains an important transport hub and for this reason the industrial market has remained robust throughout the recession with rental levels and investment yields for prime space proving to be resilient to falls in other regions.

In terms of investment activity continuing low bank base rates and virtual zero returns for money on deposit have fuelled investor demand for quality commercial real estate and we believe this is set to continue throughout the remainder of 2012 despite the lack of appetite from the banking sector to finance commercial property acquisition.

In summary, whilst predictions are always dangerous, we believe there are reasons to be optimistic about the short and medium term prospects for commercial property with occupier demand improving gradually against a background of limited supply due to a lack of speculative development over recent years, helping to keep rental levels certainly in respect of prime stock from falling.