Building a resilient city brand: Leeds navigating uncertainty and embracing opportunity

In times of global and national uncertainty, cities like Leeds must demonstrate resilience to thrive. While 2024 has presented challenges – shifting political landscapes, economic fluctuations, and geopolitical dynamics – it has also highlighted Leeds' inherent adaptability and strengths. 2024 saw changes to Leeds City Council’s leadership and central government proposals for Local Government reorganisation and increased devolution powers, which mark a new chapter for the city.

What makes a city resilient? One that can navigate challenge, learn from crises and capitalise on change, that also builds confidence in its ability to handle future uncertainties.

Navigating uncertainty

The limited new office sector activity, mirroring national trends, is not a reflection of decline but rather a period of recalibration. There have been two new starts compared to the Crane Survey average of four, and three completions at West Village, 14 King Street and City Square House, all within the West End district.

While factors such as interest rate uncertainty, construction cost inflation and the cost of lending have slowed investment decisions and challenged the viability of delivering office development, the latter part of 2024 signals potential improvement. The Bank of England's interest rate cut and the new government's pro-growth agenda, particularly for regional cities, offer a sense of optimism. There are also signs of construction cost inflation easing, with evidence from BCIS reporting that material cost inflation has moderated since its peak in 2022, with rental levels also on the rise.

However, there remain ongoing challenges that the industry is still navigating. Construction company insolvencies are causing delays across the UK, and widespread labour and skills shortages are causing pricing pressures. Poor transport connections within and between cities is impairing the growth potential of northern cities, creating a skills gap which has compounded to create a shallow pool of labour.

Further impacting the office sector is slow rental growth, especially when compared to residential development which has kept pace with inflation, making it a more attractive investment prospect.  The average number of new starts in the last five years for residential has been six, compared to just 2.8 in the office sector. 2024 saw only two new starts in the office sector. 

However, the importance of traditional office occupiers remains, especially as the Leeds economy is seeing a growth in start-ups and innovation-led businesses, providing a resilient base to the economy. Leeds is also recognised as the second largest centre in the UK for start-up businesses.

Embracing opportunity 

Despite these challenges, Leeds benefits from a resilient and diversifying economy. While the importance of traditional office occupiers remains, Leeds is witnessing growth in start-ups and innovation-driven businesses, particularly in fintech, health tech, and green & net-zero sectors.

This shift is reflected in recent office rental activity. While some traditional occupiers are expanding, for example, Mills & Reeve at 1 City Square, others seek high-quality, refurbished spaces with collaborative functionality (e.g. EY at Wellington Place). Large institutions such as the Financial Conduct Authority (FCA) and National Wealth Fund have cemented their place in the city, drawn by Leeds' competitive rents and strong talent pool.

Leeds' Inclusive Growth Strategy 2023-2030, which prioritises these emerging sectors, underpins its commitment to a diversified future. This strategy leverages Leeds' established strengths – a skilled workforce nurtured by its universities and a robust employer base. This combination creates a powerful city "brand" attracting both talent and investment. 

The Leeds Innovation Arc exemplifies this forward-thinking approach, fostering a thriving business ecosystem rooted in innovation and partnerships between the city’s key institutions, private sector and local authority. By co-locating complementary industries and enhancing physical connections, the Arc will enable businesses to adapt and thrive in this evolving landscape.

In response to changes in office occupier demands, providers are adapting workspaces, prioritising agility, flexibility, and collaboration. Bruntwood's recent West Village refurbishment, featuring their most extensive communal workspace offering to date, exemplifies this trend towards high-quality, adaptable office environments.  To continue to support emerging and growing sectors, we expect to see more office spaces that offer co-working and high amenity and collaboration spaces which meet the needs of these sectors.   

Changing demand for office products is making it challenging to deliver office developments with confidence.  The speed of change and demand for ‘agility’ mean office products are becoming outdated very quickly. This creates demand for agile contracts and leases, such as shorter terms and flexible break clauses, further impacting on the viability challenge faced by the office sector.

Notwithstanding, evidence from the Leeds Office Agents Forum (LOAF) suggests that there is continued demand for Grade A and other floorspace office products and we’d expect rents to be pushed as supply remains limited.  To respond to the challenges faced, the office sector needs to embrace the opportunities posed – we expect to see more office spaces that offer co-working, high amenity and collaboration spaces that meet the needs of emerging sectors and changing tenant demands.   

A resilient brand

Leeds' commitment to sustainability is central to its resilience. New developments increasingly incorporate net-zero aspirations from conception, with projects like the award-winning Leeds Pipes project at the forefront of this movement. The project was expanded during 2024 to incorporate more developments in the west of the city centre and has been recognised as an international exemplar of a city-wide heating solution. 

There is recognition in the city’s policy landscape for the role retrofit can play in addressing evolving occupier requirements and delivering strong sustainability and ESG credentials. Refurbishment of existing buildings may also allow delivery of high-quality space with less risk involved, which will assist with the short term viability challenges, such as shorter construction periods having less risk of cost inflation.  Future success in the office market will be led by those who can deliver high quality, sustainable, flexible space, either new build or refurbished. 

To further bolster resilience, Leeds must amplify its strengths and actively communicate its offerings. Highlighting the city's investment appetite, skilled workforce, growing tech and creative industries, strong higher education institutions, and investments in transport and culture will attract talent and businesses seeking to operate in a thriving and sustainable environment.

Several government initiatives have placed Leeds into the spotlight. Devolution has empowered West Yorkshire to champion its priorities on a national stage, evidenced by the Mass Transit allocation in the Autumn 2024 budget.

The 2024 acquisition of a minority stake in Leeds United by Red Bull presents a unique opportunity to elevate the city's global sporting profile. The planned expansion of Elland Road will bring a significant increase in capacity which would make Elland Road the seventh largest club stadium in the country, and investments would bring the stadium in line with UEFA Category 4 status to be amongst the elite in European Stadia. Utilising the approx. 30 acres of brownfield land around the stadium and making strategic investments in city centre connections, including through WYCA’s mass transit options, are essential to maximise the potential impact of this global platform.

Leeds' visitor economy continues to grow, as shown by the growth of significant events like UK Real Estate, Investment and Infrastructure Forum, and pipeline proposals like the Royal Armouries’ redevelopment of the Tiltyard, which is set to expand their conference and exhibition facilities. 

This progress underscores the need for continued investment in supporting infrastructure, particularly hotel capacity, to offer a well-rounded visitor experience and attract further investment in this sector.  The Deloitte European Hotel Industry Insights Survey 2024 lists the top 10 regional cities for hotel investment, from which Leeds is notably absent.

It is positive then, that activity in the hotel sector has progressed. In 2024, the Sovereign Square Hyatt Hotel completed construction, delivering 331 new beds to the city, the highest since 2017. This is set to be further supported by the completion of two schemes by mid-2025, delivering over 80 new hotel beds together the Jubilee Hotel at East Parade, and the refurbishment and extension of the Cosmopolitan Hotel which started construction in 2024.

Overall, Leeds demonstrates resilience by embracing change, fostering innovation, and prioritising sustainability. By continuing to adapt, invest strategically, and effectively communicate its strengths, Leeds is well-positioned for future success.