The Big Nine
Quarterly review of take-up in the major regional office occupier markets in the UK.
Take-up reached 1.6m sq ft in the second quarter of the year, a 25% decrease in demand since the first quarter. However, boosted by a strong Q1, H1 take-up stood at 3.7m sq ft to represent the strongest half year since 2019 and 6% ahead of the 10-year average. Cities significantly outperforming the 10-year H1 average include Bristol (21%), Manchester (27%) and Newcastle (37%). Indeed, these cities saw the largest deals in Q2, the largest of which was at 100A Bristol Business Park where Rolls Royce took an 87,600 sq ft sublease.
The out of town market continues to gain momentum. City centre locations continue to suffer from a chronic lack of Grade A space – particularly of larger floor plates – and, as a result, some occupiers with larger requirements are looking in out of town markets. So far this year, six of the 10 largest deals have been outside the city centre, compared with last year where all top 10 deals took place in city centre locations.
Fortunately for occupiers focused on city centre locations, the Q2 Grade A vacancy rate saw a marginal increase from 2.0% to 2.2% driven by completions filtering through to supply. 2.1m sq ft of deliveries are forecasted across the Big Nine this year, 49% of which are already pre-let.
Encouragingly, there was a 43% quarterly increase in Big Nine investment volumes in Q2 reaching £314m. This brings H1 volumes to £533m, 7% up on the same period last year. Whilst H1 volumes remain significantly below historic trends, transaction numbers indicate improving sentiment with 46 transactions recorded so far this year, the highest H1 level since 2022.
Buyers are increasingly stepping forward ahead of anticipated price increases, indeed, the rate of MSCI capital growth declines across Rest of UK Offices are gradually slowing with -0.6% declines in June ’25 versus -1.04% 12 months ago.
The largest transaction of the quarter was Melford Capital’s acquisition of M&G’s 101 Embankment, Salford for £75m reflecting a NIY of 8.45%. This marks Melford Capital’s second significant transactions in the UK regions in under a year following their acquisition of EQ, Bristol for £103m in Q4 2024.
Overseas investors continue to command the largest share of investment activity accounting for 31% of transactions over the last 12 months (Jul ’24 – Jun ’25). UK Institutions have increased their share of volumes from 7% over the previous 12-month period (Jul ’23 – Jun ’24) to 20% in the last 12 months.
Despite a recent jump in inflation figures to 3.6% in June, up from 3.4% in May, the Bank of England is widely expected to continue their policy of cutting interest rates. A weakening economic picture, underpinned by a slowing labour market and weak GDP data is set to place further pressure on the BOE’s Monetary Policy Committee to prioritise growth over fighting inflation with two further base rate cuts expected in H2. This will strengthen investor confidence, resulting in an uptick in investment activity over the remainder of the year.
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