CommercialDistrict

CITY FRINGE

OUT OF TOWNWAVERTREE

OUT OF TOWNSOUTH LIVERPOOL

OUT OF TOWNST HELENSOUT OF TOWN

KNOWSLEY

OUT OF TOWNNORTH LIVERPOOL

M58

M6

M57

M62

WATERLOO

BOOTLE

RIVER MERSEY

Note on terminology For the purposes of this research, Grade A space was defined as office space completed since 1st January 2013, Grade B space as office space completed before 1st January 2013 or other accommodation recently refurbished or due to be refurbished, Grade C as unrefurbished but ready for occupation. Grade D is office space which could not be occupied without substantial refurbishment and where no plans exist for such refurbishment.

The Commercial District focuses on the main office district around Old Hall St, Castle St, Tithebarn St, Dale St and Chapel St and also includes the key waterfront office buildings between Albert Dock, Pier Head and Princes Dock. The City Fringe includes the remaining areas in the City Centre (L1, L2, L3) area, largely focused around Duke St, Renshaw St and Mount Pleasant (University District). The City Region analysis includes the key out-of-town office areas in Liverpool, Knowsley, Sefton and St Helens.

SUMMARY

OVERALL OFFICE TAKE-UP FOR THE LIVERPOOL CITY REGIONWAS AN IMPRESSIVE 653,673 SQ FT IN 2017, AN INCREASE OF 25% ON THE 2016 FIGURE OF 523,456 SQ FT.

THE OVERALL TAKE-UP IN THE CITY CENTRE (COMMERCIAL DISTRICT AND CITY FRINGE)ACCOUNTED FOR 484,845 SQ FT WHICH IS UP 25% WHEN COMPARED TO 2016.

TOTAL OFFICE TAKE-UP IN THE COMMERCIAL DISTRICT IN 2017WAS 396,436 SQ FT WHICH IS UP BY 16% FROM 2016 AND WAS THE HIGHEST TAKE-UP SINCE 2009.

THE AVERAGE SIZE OF DEAL IN THE COMMERCIAL DISTRICT IN 2017WAS 4,069 SQ FT WHICH IS UP FROM 2,880 SQ FT IN 2016.

IN TERMS OF VACANT STOCK, SUPPLY CONTINUES TO FALLAND IS NOW AT 958,083 SQ FT OF OFFICE SPACE AVAILABLE IN THE COMMERCIAL DISTRICT AND ONLY 330,438 SQ FT IS READY TO OCCUPY.

AS WITH 2016 GRADE B/B* OFFICE SPACE REPRESENTSTHE MAINSTAY OF THE COMMERCIAL DISTRICT ACCOUNTING FOR 97% OF TRANSACTIONS AND 97% OF TOTAL TAKE-UP.

TAKE-UP IN THE CITY FRINGE AREA WAS 88,409 SQ FT IN 2017REPRESENTING A 100% INCREASE FROM 2016.

THE OUT OF TOWN TAKE-UPWAS 168,828 SQ FT WHICH IS UP FROM 136,475 SQ FT IN 2016.

INTRODUCTION

We hope you find the review both useful and enlightening and we welcome any feedback.

Tony Reed Head of Property Group 2017, Professional Liverpool

This report continues to highlight not only the strength of the office market, but also underlines the challenges we face in Liverpool. It’s extremely encouraging to see that take-up in the Commercial District was up 16% on the previous year it is also the highest figure since 2009. All that is encouraging for the Commercial District but the worrying trend in the reduction of office stock, down since 2014 by 1,150,000 sq. ft. to 5,639,117 sq. ft. is a major concern for the sustainability of the district. The proposed development of grade A space at Pall Mall will be a welcome and much needed addition to the Commercial District.

The Commercial District continues to be seen as the preferred destination for the professional sector and is also now firmly established as a location of choice for the creative and digital industries. The Liverpool BID company is committed to ensuring that the Commercial District is at the heart of a world class business district and our focus continues to be to support and drive investment in the area.

Bill AddyCEO, Liverpool BID Company

Welcome to the 13th edition of the review, which guides you through the highlights of the Liverpool City Region’s office market over the last calendar year.

A big thank you goes to the member property agents of Professional Liverpool, who help collate the data, and to the Liverpool BID Company for once again supporting the production and promotion of the report.

The figures tell a story of the office market in 2017 which, in many ways, was a positive year for Liverpool City Region. It is great to see that overall office take-up for the Liverpool City Region has, for the sixth year running, exceeded 500,000 sq ft having achieved total lettings of over 650,000 sq ft.

As mentioned in previous reports, there remains the challenge of the lack of availability of Grade A office stock in the Liverpool City Region and this year we have again seen a dramatic fall in availability of Grade B* (space of a comparable quality to Grade A space).

In the Commercial District, there is now no vacant Grade A office space remaining and the only Grade A space in the City Centre is now in the City Fringe area. Despite this, take-up in the Commercial District remains strong and 2018 looks set to be another positive year for the Commercial District.

In terms of sectors, 2017 saw a continued dominance of the professional services sector, along with the creative/IT/media sectors. One positive trend in the Commercial District is that we have seen the average size of letting increase to over 4,000 sq ft which is up from 2,880 sq ft in 2016 highlighting a balanced demand for office space and less reliance on small lettings.

653,

673

sq ft

2017

2016

2015

2014

2013

523,

456

sq ft

576,

847

sq ft

563,

034

sq ft

534,

100

sq ftOFFICE

TAKE-UP INLIVERPOOL CITY REGION

The combined figure includes the Commercial District, City Fringe and out of town markets including Knowsley, St Helens, South Liverpool, Wavertree, North Liverpool and Bootle/Waterloo. Take-up in the City Region was once again dominated by the Commercial District.

2017 saw significant contributions across all the out of town markets particularly in South Liverpool with 76,518 sq ft of recorded transaction. The market continues to be dominated by the Commercial District which accounted for 61% of total take-up and 53% of the number of deals.

Overall and despite falling supply, the take-up levels for the City Region remain on a positive trend, with 192 deals recorded in 2017 (191 in 2016) showcasing the continued confidence in the commercial property market.

OVERALL OFFICE TAKE-UP FOR THE LIVERPOOL CITY REGION WAS AN IMPRESSIVE 653,673 SQ FT IN 2017, AN INCREASE OF 25% ON THE 2016 FIGURE OF 523,456 SQ FT.

The five year comparisonThe combined office take-up in the Liverpool City Region in 2012 was reported at a healthy level of 534,730 sq ft - take-up for 2017 represents a 22% increase on this figure.

484,

845

sq ft

2017

2016

2015

2014

2013

386,

981 s

q ft

383,

023

sq ft

451,1

94 s

q ft

376,

626

sq ftOFFICE

TAKE-UP IN LIVERPOOL CITY CENTRE

The overall take-up for this area accounted for 484,845 sq ft which is up 25% when compared to 2016.

THE OVERALL TAKE UP FOR THE COMBINED COMMERCIAL DISTRICT AND CITY FRINGE AREA (MAIN OFFICE AREA OF L1, L2, L3) ACCOUNTED FOR 484,845 SQ FT WHICH IS UP 25% WHEN COMPARED TO 2016.

The five year comparisonThe overall take-up in 2012 for the Liverpool City Centre area was 325,530 sq ft and take-up for 2017 represents an impressive 49% increase.

100

2017

2016

2015

2014

2013

119

156

121

108OFFICE

TAKE-UP IN THE COMMERCIAL DISTRICT

There were 100 transactions in 2017 down from 119 in 2016 but the average size of deal in 2017 was larger at 4,069 sq ft - up from 2,880 sq ft. As with 2016 this continues to highlight a balanced take up across a range of size requirements.

The largest deal of 2017 in the Commercial District was to Keoghs Solicitors taking 43,109 sq ft at No.1 St Paul’s Square. The small office market (sub 1,000 sq ft) still represents an important sector comprising 41% of all transactions, however, this number has fallen from 51% in 2016 (54% in 2015).

TOTAL OFFICE TAKE-UP IN THE COMMERCIAL DISTRICT IN 2017 WAS 396,436 SQ FT WHICH IS UP BY 16% FROM 2016 AND WAS THE HIGHEST TAKE-UP SINCE 2009.

The five year comparisonThe overall take-up in 2012 for the Commercial District was 259,602 sq ft and take-up for 2017 represents a 53% increase on this figure. In 2012 there were a total of 61 deals in the Commercial District at an average size of 4,256 sq ft.

(percentage of space taken)

A – 6%

B* - 65%

B – 29%

C – 0%

A – 2.5%

B* - 64.5%

B – 32.0%

C – 1.0%

2016

2017

TAKE UP BY GRADE OF OFFICE: COMMERCIAL DISTRICT

Again, as with previous years Grade B space accounted for the largest number of transactions with a total of 53 deals representing 55% of all deals (66% in 2016). The average size of deal in the sector was 2,356 sq ft which is a marked increase from 1268 sq ft in 2016.

As with 2016 the most buoyant sector in terms of total amount of space taken was Grade B* with a total of 256,609 sq ft. This category accounted for 42 transactions in 2017 (37 in 2016) at an average size of 6,110 sq ft (6,009 sq ft in 2016).

Once again, the report highlights that Grade B/B* office space represents the mainstay of the Commercial District accounting for 97% of transactions and 97% of total take-up.

2017 SAW ONLY ONE DEAL FOR GRADE A IN THE COMMERCIAL DISTRICT TO REGUS AT No 1 MANN ISLAND.

< 1,000 – 41%

1,001-2,500 – 26%

2,501-5,000 – 16%

5,001-10,000 – 5%

10,001-20,000 – 9%

> 20,000 - 3%

TAKE UP BYSIZE OF LETTING: COMMERCIAL DISTRICT

When combined with lettings below 2,500 sq ft, this represents 67% of all deals (70% in 2016) in the Commercial District. There were 17 transactions over 5,000 sq ft in 2017, which is the same as 2016 and 2015. There were three deals above 20,000 sq ft in 2017 compared to two in 2016 and zero in 2015.

When considering the total size of space taken in each size range, it continues to suggest a balanced and maturing economy with a positive spread of deals across all size ranges.

AS WITH THE LAST FEW YEARS, SMALLER LETTINGS HAVE DOMINATED THE MARKET IN THE COMMERCIAL DISTRICT IN 2017, WITH 41% OF ALL LETTINGS (41 DEALS IN TOTAL) UNDER 1,000 SQ FT.

Percentage of deals by number of deals in each size range

The five year comparisonIn 2012, 54% of deals were under 2,500 sq ft compared to 67% in 2017. In 2012, there were 8 deals over 10,000 sq ft but this figure increases to 12 in 2017.

2017

Grade A – 0%

Grade B* - 25%

Grade B – 13%

Grade C – 47%

Grade D – 15%

OFFICE SUPPLY: COMMERCIAL DISTRICT

In terms of vacant stock, supply continues to fall and is now at 958,083 sq ft of office space (225,000 sq ft of this is under offer to HMRC) available in the Commercial District, which is a reduction from 1,293,958 sq ft in 2016, 1,577,022 sq ft in 2015 and 2,046,255 sq ft in 2014. In terms of space that is refurbished and ready to occupy (i.e. Grade A, Grade B* and Grade B) total vacant stock is now only 330,438 sq ft - a drop of 115,127 sq ft from 2016.

It is important to note that 62% (66% in 2016) of the available stock is currently in the poorer quality and unrefurbished Grade C and D categories. As with previous years, the decreasing supply can be attributed to a number of office conversion projects, however, we are starting to see a significant fall in available space in a number of key office buildings, including, 5 St Paul’s Square, The Plaza and Exchange Station.

The contraction also highlights the continuing lack of new build activity in the Liverpool office market. There is now no availability of Grade A space within the Commercial District.

We are continuing to see falls in Grade B* stock, which is key to filling the void left by a lack of Grade A space, and have seen availability levels reduce to 240,189 sq ft in 2017 down from 281,920 sq ft in 2016 and 404,239 sq ft in 2015.

THE TOTAL OFFICE STOCK IN THE COMMERCIAL DISTRICT WAS 5,639,117 SQ FT A DECREASE OF 245,103 SQ FT FROM 2016 AND 615,375 SQ FT FROM 2015 AND 1,150,000 SQ FT COMPARED TO 2014. THIS HIGHLIGHTS THE CONTINUING REDUCTION OF OFFICE STOCK IN THE COMMERCIAL DISTRICT.

The five year comparisonThere is now no supply of Grade A space whereas in 2012 8.6% of available office space was in the Grade A sector. Interestingly, the report in 2012 highlighted that supply was increasing ‘partly by the failure of a weakened residential sector to recycle much of the older unlettable stock’.

2017

OFFICE TAKE UP: IN CITY FRINGE

There were a total of 31 transactions at an average of 2,852 sq ft in the City Fringe in 2017 with the largest deal to RCP who took 15,462 sq ft at William Henry Duncan Building as Phase 1 of the RCP North Project .The Royal College of Physicians committed to 15,462 sq ft within the William Henry Duncan Building within the Knowledge Quarter. This is Phase 1 of RCP North, which will account for a much larger requirement of 70,000 sq ft within Paddington Village. The choice of RCP to locate within Liverpool was down to the collaborative nature of the city and is a real coup for the region given the steep history of the college, who turned 500 this year!

TAKE-UP IN THE CITY FRINGE AREA WAS 88,409 SQ FT IN 2017 UP 100% FROM 2016.

The five year comparisonTake up in the City Fringe in 2017 was 34% higher than 2012 which was 65,928 sq ft.

88,4

09 s

q ft

2017

2016

2015

2014

2013

44,2

67 s

q ft

67,8

54 s

q ft

59,6

62 s

q ft

81,0

67 s

q ft

Percentage of total sq ft in each area

South Liverpool 45.3%

Wavertree 13.6%

Knowsley 15.6%

North Liverpool 0%

Bootle / Waterloo 15.1%

St Helens 10.4%

OFFICE TAKE-UP: OUT OF TOWN

South Liverpool enjoyed a particularly positive 12 months with 76,518 sq ft of take-up across 11 deals.

The key transactions in the out of town market included 42,000 sq ft to North West Ambulance Service at Estuary Point, South Liverpool and 12,935 sq ft to Human Recognition Systems at The Bunker, Wavertree.

In terms of number of transactions, Burlington House, Waterloo enjoyed a successful year with a total of 9 deals over the 12 month period.

OUT OF TOWN TAKE-UP IN 2017 WAS 168,828 SQ FT - COMPARED TO 136,475 SQ FT A POSITIVE YEAR IN MOST OUT OF TOWN LOCATIONS ASIDE FROM NORTH LIVERPOOL WHERE THERE IS A LACK OF SUPPLY.

2017

TAKE-UP BY GRADE OF OFFICE: CITY FRINGE AND OUT OF TOWN

As with the Commercial District, Grade B was by far the dominant sector with 86% of total square foot taken - a decrease from 92% in 2016 but up from 78% in 2015.

With the continuing lack of new development in out of town locations, we would expect similar trends in forthcoming years.

AS PREVIOUSLY REPORTED THERE CONTINUES TO BE A LACK OF SUPPLY, PARTICULARLY GRADE A SPACE, IN OUT OF TOWN AREAS. IN FACT, THERE WERE NO GRADE A DEALS IN 2017. 2017

A – 0% B – 86% C - 14%

Public Sector - 4%

Professional - 40%

Financial/Banking - 16%

Training - 1%

Creative/IT/Media - 19%

Distribution/Shipping - 1%

Outsourcing/Call Centre - 2%

Other - 17%

TAKE-UP BYSECTOR: COMMERCIAL DISTRICT

The Commercial District had a very successful year of attracting companies from the creative/IT/media sector with 19% of take-up and 23 individual deals at an average of 3,196 sq ft across a range of buildings including Cotton Exchange and Oriel Chambers. The largest deal in the creative/IT/media sector was to Trinity Mirror taking 25,445 sq ft at 5 St Paul’s Square.

The financial/banking sector made a strong recovery in 2016 accounting for 16% of total take-up which is an increase from just 3% in 2016. The other sectors represented a significant 17% of total take-up which is largely due to three significant deals to serviced office operators.

As with 2016, the largest proportion of 2017 take-up was in the professional sector which accounted for 40% of total take-up, a slight decrease from 42% in 2016. This sector accounted for 38 deals (44 deals in 2016) at an average of 4,152 sq ft per letting (3,387 sq ft in 2016).

2017

The five year comparisonTake up from the Professional and Financial Services sector was 56% (221,884 sq ft) of total take up in 2017 compared to 34% (87,616 sq ft) in 2012.

TAKE-UP BY SECTOR: CITY FRINGE

The key transactions in this sector were to Baltic CIC who took 15,000 sq ft at Norfolk Street and Uniform who have taken 12,789 sq ft at 9-19 Bold Street.

2017 SAW THE CREATIVE/IT/MEDIA DOMINATE THE TAKE-UP WITH 44% OF ALL SPACE TAKEN (UP FROM 6% IN 2016) AND 37% OF THE TOTAL NUMBER OF DEALS.

Public sector - 0%

Professional - 15%

Financial/Banking- 0%

Training - 19%

Creative/IT/Media - 44%

Other- 22%

2017

TAKE-UP BY SECTOR OUT OF TOWN

The Public Sector was the responsible for 34% of take-up which is largely due to the deal with North West Ambulance Service who have taken 42,000 sq ft at Estuary Point in South Liverpool.

Creative/IT/media sector accounted for 23% of take-up in 2017 which is up from just 5% in 2016.

THE OUT OF TOWN TAKE-UP WAS 168,828 SQ FT WHICH IS UP FROM 136,475 SQ FT IN 2016. HOWEVER, UNLIKE THE PREVIOUS THREE YEARS THE PROFESSIONAL SECTOR ONLY REPRESENTED A SMALL PORTION OF THE TAKE-UP WITH 3%, DOWN FROM 38% IN 2016.

Public sector - 34%

Professional - 3%

Financial/banking - 4%

Training - 8%

Creative/IT/media - 23%

Other - 29%

2017

OFFICE SUPPLY: CITY FRINGE AND OUT OF TOWN

There is now just 33,200 sq ft of Grade A space which places increased importance on Grade B office space which stands at approximately 475,000 sq ft at the end of 2017. In total 52% of the Grade B stock is in the City Fringe area and as with 2015 this is still dominated by the high specification refurbishments at Watson Building (75,000 sq ft) and The Department (40,000 sq ft).

In terms of Grade C supply, Wavertree continues to dominate with 131,000 sq ft of availability in this Grade.

THERE WAS 842,976 SQ FT OF VACANT OFFICE SUPPLY IN THE CITY FRINGE AND OUT OF TOWN MARKETS IN 2017 REPRESENTING A DECREASE OF 99,736 SQ FT FROM 2016 AND 333,717 SQ FT FROM 2015. AS WITH THE COMMERCIAL DISTRICT, THIS CONTINUES TO REFLECT THE LACK OF NEW SUPPLY TO THE OFFICE MARKET PARTICULARLY TO THE OUT OF TOWN MARKET.

RENTAL VALUES

However, we have started to see increases in the Grade B* sector which is now seeing rents at Grade A levels of over £20.00 per sq ft at Royal Liver Building and deals of £17.50 - £18.50 per sq ft at other locations, for example, The Plaza, Exchange Station and Princes Dock. The Grade B market has seen some smaller increases with headline rents typically at £13.50 - £14.50 per sq ft.

Out of town rents continue to plateau in 2017 with typical rents of around £8.50 - £12.50 per sq ft, although significantly, there were hardly any Grade A deals.

BUILDING TRANSACTIONS

Investment in offices totalled £86.95m in 2017. The volume would have been higher but the market has been constrained by a lack of suitable product. There were just 4 transactions in the region, three of which took place in the second half of 2017.

The two largest are:4 St Paul’s Square - comprising 107,000 sq ft sold to Aberdeen Asset Management for £18.7m.

Royal Liver Building - comprising 320,999 sq ft sold to Corestate for £48m (achieving £10m above asking price). Net Initial 6.65%.

Prime yields are considered to be around 6.5% but the lack of new evidence means that it’s not a ‘market’ figure. It is important to highlight that the yield differential between Liverpool and other regions is a key driver for demand in the city as the perceived value is considered more attractive than any other top 6 UK Regional market.

RENTAL LEVELS FOR GRADE A SPACE HAVE REMAINED REMARKABLY CONSISTENT TO THE PREVIOUS FOUR YEARS WITH HEADLINE RENTS AT CIRCA £20.50 PER SQ FT.

OUR SPECIAL THANKS GO TO...

This report has been compiled by members of the Property Group of Professional Liverpool with assistance from Liverpool Vision and the Commercial District BID.

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