The Liverpool office market is facing significant challenges, with property agents warning of stagnation and low rents. The public sector is being urged to intervene to help reset the market and stimulate growth.
Research by the Liverpool Office Agents Forum (LOAF) indicates a sharp decline in transactions and a lack of new Grade A office developments. This article examines the current state of the Liverpool office market and explores potential solutions to these issues.
Decline in Transactions and Available Office Space
According to the latest data from the Liverpool Office Agents Forum (LOAF), the city saw a dramatic reduction in office space transactions in the second quarter of the year. Only 23,879 sq ft of transactions were completed in Q2, a stark contrast to the robust 95,905 sq ft of space transacted in Q1.
LOAF, a collective of property agents from across Liverpool, sheds light on the city’s significant amount of vacant office space. Of the 900,000 sq ft available, only 12% is classified as Grade A accommodation, and a mere 7.75% is located within the business district.
Impact of Lack of Grade A Office Space
Gabriel Davies, associate at Fisher German and chair of LOAF, commented on the situation: ‘The lack of brand-new Grade A offices is having a negative impact on the market. It is not as simple as build it and they will come.’,
He further explained that the absence of a high headline rent to support speculative office developments has led to a stagnation in new office space creation. Several refurbishment schemes have been undertaken, but these are insufficient to meet the demand for top-tier office space.
Challenges Faced by Developers
Developers are apprehensive about investing in Liverpool due to the city’s low headline rent compared to other regional cities. This has resulted in developers looking elsewhere for more lucrative opportunities.
Best-in-class offices usually command a rental premium. However, without sufficient headline rents, Liverpool remains trapped in a cycle of low rents and limited new developments. Davies emphasised that a reset of the market is essential to break this cycle.
The Role of Public and Private Partnership
A potential solution lies in the partnership between the public and private sectors. Such collaborations could result in the development of new office spaces, as seen in some successful projects in the Wirral area.
In the Wirral, the public sector has assisted in office space development by providing funding or acting as a pre-let. This approach has improved office stock quality, attracted new tenants, and driven up headline rents, setting a precedent for Liverpool.
Future Prospects and Emerging Sectors
Despite the current issues, there is optimism about the future. Several sectors, including gaming and creative industries, have been crucial in absorbing office space over the past 12 months.
The Liverpool City Region Combined Authority’s Corporate Plan aims to further diversify the economy through strategic investments in health, life sciences, digital and creative industries, and advanced manufacturing. This plan also focuses on inclusivity, ensuring economic growth benefits all residents.
The Importance of Modern Office Spaces
The Corporate Plan also addresses long-standing inequalities and aims to remove barriers to opportunity by enhancing access to education, employment, and skills development. Such initiatives are critical in attracting new businesses and retaining existing ones.
Conclusion: A Call for Action
In conclusion, the Liverpool office market faces significant challenges that require immediate attention. The public sector’s involvement is crucial in resetting the market and encouraging new developments. A collaborative approach between public and private sectors could provide the much-needed impetus to break the cycle of low rents and stagnation.
The city’s office market is at a crossroads, with stagnation and low rents creating a challenging environment for growth.
A combined effort from both public and private sectors is essential to revitalise the market and attract new developments, ensuring Liverpool remains competitive and dynamic.
