This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.

Bookmark Email Print page

Deloitte Real Estate UK key cities report

Investment set to rise in the regions

2 April 2013

Investors in the commercial office market are increasingly being drawn towards the UK regions, according to a new report by Deloitte Real Estate.

The UK Key Cities publication explores the trend that regional offices are emerging as a focus for savvy investors seeking higher returns. At the same time, individual cities are recognising the need to stand apart from competing locations and bridge the gap between themselves and London. These cities are being bolstered by factors such as improved connectivity through large planned infrastructure projects, devolution of power, and investment into the retail and leisure markets.

Anthony Duggan, head of research at Deloitte Real Estate, said: “Investors are increasingly being priced out of the London real estate market and are now seeking opportunities outside the capital. We’ve seen a large number of new entrants to the UK investment market cutting their teeth in London, and we now expect to see them beginning to pursue opportunities in the regions where there is the potential for higher income yields.”

Market conditions and future changes in key cities across the UK are studied in the report, which suggests that occupational demand for offices will be mainly from the professional and administrative sectors with active demand from the legal sectors in the regions. Employment growth is expected to be slow during this year but return to stronger levels of growth in future years.

In the capital, office rents in the City of London are not expected to change yet yields will harden 25 basis points, driven by the strong overseas demand and TMT and insurance occupiers are dominating the demand in the City. West End rents on the other hand are expected to increase 10 per cent this year with yields also hardening by 25 basis points.

In the regions, rental growth is not expected in Leeds and Birmingham but Manchester’s lack of Grade A completions in core areas will drive rents up by three per cent with incentives reaching a record low. Expect office refurbishments rather than new construction in Leeds, and in Birmingham a high number of offices changing use, such as hotels and residential. North of the border in Scotland, current lack of development and low stocks of Grade A space in the office market will push rental growth; Edinburgh forecasted a seven per cent increase and Glasgow five per cent. Glasgow is also the first city in the study to see new development activity commencing.

The report explores the new powers gained by cities under the City Deals scheme. Liverpool, Leeds, Bristol, Newcastle and Birmingham are among the group of cities that have agreed a form of devolution in exchange for an offer to improve outcomes and efficiency. The agreement with the government allows a city to drive its own economic strategy and make decisions on infrastructure and investment. Newcastle for example is in the process of initiating a £92m investment programme which it hopes will lead to over 13,000 jobs. Such is the expected success that 20 further deals have been confirmed for mid-sized cities.

Duggan concludes: “We expect to see increasing activity in the UK’s regional markets during 2013 with more, albeit still low, leasing deals and positive rental growth in some locations. Importantly, there are strong signals that there will be further investor interest in the regional office markets this year with both domestic and overseas investors looking outside London for their returns.

“It is encouraging to see the momentum that a number of these key regional centres have in terms of infrastructure and governance and we believe that this will provide a level of confidence to investors in the future performance of these local real estate markets.”


Note to editors
About Deloitte Real Estate:

Deloitte Real Estate redefines the concept of a full-service real estate business, offering a breadth of capability and an innovative approach unequalled in the market.

Our team combines traditional property services with financial and business advisory expertise to deliver integrated solutions on the most simple assignment to the most complex. We apply a depth of insight drawn from our understanding of all industries and sectors to advise occupiers, lenders, investors and the public sector on every aspect of real estate in an increasingly complex world.

About UK Key Cities:
This is the seventh UK Key Cities report and looks at the market conditions and future changes in key cities across the UK: Birmingham, Manchester, Leeds, Edinburgh, Glasgow, City of London and West End, plus a snapshot of other regional cities: Bristol, Cambridge, Cardiff, Liverpool, Newcastle and Reading.

About Deloitte:
Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see for a detailed description of the legal structure of DTTL and its member firms.

The information contained in this press release is correct at the time of going to press.

Member of Deloitte Touche Tohmatsu Limited.

Media contacts

Sue Gibson
Deloitte LLP
Job Title:
+44 (0)20 7303 3156

Share this page

Email this Send to LinkedIn Send to Facebook Tweet this More sharing options

Get in touch

More on Deloitte