_Sheffield 2017 commercial property predictions

Thriving, socially diverse and rapidly developing, Sheffield is billed as the UK's outdoor city due to its location on the edge of the Peak District and is one of the strongest performing cities in the country.

April 13, 2017

With two leading universities supporting growing technologies and entrepreneurialism, it is also now home to Boeing and McClaren's advanced manufacturing divisions and strong business growth.

Knight Frank’s commercial property experts in Sheffield offer their predictions for the city’s commercial real estate sector.

Grade A office space to boost city centre opportunities

Sheffield had suffered from a shortage of available high specification city-centre office space. This is now being addressed with exciting central opportunities delivering needed grade A space for both the existing market and potential inward investment enquiries to Sheffield.

Buildings including 3 St Paul's Place, Westfield House and Steel City House are incredibly well appointed and offer a quality working environment within the city centre.

The latest phase of Digital Campus with 80,000 sq ft of available space at the new Acero building is set for completion June 2017.

HSBC has agreed to lease 140,000 sq ft as anchor for the first phase of Sheffield’s new £480m Retail Quarter. Another large occupier deal in 2016 was Arup taking 16,000 sq ft at 3 St Pauls Place, the final part of the £130m Heart of the City project.

3 St Paul's Place was the first speculative build to complete after the recession and provides 10 storeys of the best office space available. The overall outlook for Sheffield is very positive.

Overseas investment boom

Overseas investment in Sheffield's commercial property market boomed in 2016 to the highest levels ever recorded, showing just how much global interest the city generates, and overall office investments reached a six year high.

The largest investment deal of 2016 was the acquisition of the 119,000 sq ft Vulcan House at the J2 Riverside Exchange by Spanish investor, Trinova Real Estate, with purchase price of £30.9m. The Home Office are the current occupants of the building with a lease running to 2028.

Notably, the Trinova acquisition was the largest transaction to complete since 2014 and was one of two sales over £10m during the year.

The sale of the 75,600 sq ft Riverside East office building for £23.4m was the other, bought by 90 North Real Estate on behalf of Arzan Wealth and Sidra Capital. We anticipate this trend to continue in 2017 as the city offers good value relative to other regional centres.

Rise in Industrial Property Rent

Industrial demand continues to be driven by a variety of sectors including warehousing, production and manufacturing.

3PLs still dominate demand for large distribution units and whilst there is less supply for them to choose from they are still cautious about committing to long lease terms and generally look for lease terms which mirror contract lengths, resulting in them often seeking five year breaks in some cases.

Regionally there are good levels of demand from the manufacturing sector, which is evident by the continued success at The AMP where headline rents of £7.25 per sq ft have now been achieved on sub 20,000 sq ft units and are expected to hit £7.50 psf shortly.’’

In terms of speculative development in South Yorkshire there is currently 52,000 sq ft across six units at The Advanced Manufacturing Park under construction; 75,000 sq ft has just been completed at Helix, J36 M1 and 195,000 sq ft at I-Port, Doncaster is on site due for completion May 2017.

Phase 2 Vantage Park, Sheffield is due on site April with 15 units of 4,500 sq ft upwards available from July onwards.

There is land around the M1 and M18 with outline consent. Schemes include Capitol Park, Barnsley (12 acres) able to accommodate up to 120,000 sq ft in a single building; Smithywood, J35 M1 (29 acres) which can accommodate 30,000 - 350,000 sq ft units; Doncaster Distribution Centre offers opportunities for 100,000 - 1,000,000 sq ft, and Tudor Cross, J29a M1 where remediation is underway due for completion March 2017 is able to offer buildings of upto 450,000 sq ft.

In the last quarter of the year, prime headline rents in the sector have been around £5.00 to £5.50 psf with an expected rise throughout the year.

Contact Knight Frank Sheffield for more information on Sheffield’s commercial property sector or to discuss your leasing or investment requirements.