How the Pandemic hit Liverpool office market moves
A snapshot of 2020 reveals how Liverpool businesses sat tight to ride out the crisis.
The COVID-19 Pandemic hit office moves across Liverpool City Region with take-up down 50% compared with 2019, but there are signs the private sector is strengthening post pandemic and planning for future growth.
There were 130 deals in Liverpool City Region in 2020, according to the Commercial Office Market Review, compiled by Liverpool BID Company and Professional Liverpool, equating to 282,261 of square feet. In the Commercial District in Liverpool city centre, total office take-up was 142,030, down 58% compared with 2019. There were 73 transitions in the Commercial District, compared with 84 in 2019.
The stay at home and working from home orders meant that office moves were made at the end of leases but were postponed where available, meaning many firms decided to stay put, waiting to make an office decision after the pandemic. The sub 2,500 sq ft market was once again highly represented within the market, representing 83.6% of all lettings. The average size of office space taken within the commercial district was 1,964 sq ft, just over half of the average deal in 2019.
The Commercial District accounted for 50.3% of total take-up and 54.6% of the number of deals as flexible opportunities in the Out of Town markets were the focus of the occupiers since the outbreak of the pandemic.
This is also evidenced by the shift in sectors taking office space, showing which industries were able to take-up new premises. The public sector dropped to 12% in the Commercial District, 10% of the city centre. The professional sector was the most active sector of the year, accounting for 35 deals at an average of 2,311 sq ft per letting. The creative/IT/media sector was the second most active sector of 2020 with 16 deals, accounting for 13.59% of the annual take-up. There were more micro businesses from this sector going to Commercial than City Fringe, especially in Quarter 3 and Quarter 4, which can mean people scaling down or Commercial District acting as an incubator for the Creative.
Another sector which performed well across Liverpool City Region in comparison to 2019, was Health & Life Sciences, displaying a 10.23% increase, driven by a number of transactions across multiple locations. Some examples of these being Spa Medica at Liverpool Innovation Park and NHS Property Services at Burlington House.
As in previous years there remains a lack of Grade A office space in Liverpool and the wider City Region and this emphasises both an urgent need for development, if the Liverpool City Region wants to attract major companies and allow business growth. There were no Grade A transactions in 2020, with Grade B / B* space accounted for all the transactions within the Commercial District. Total office space available in Liverpool City Region is 1,639,420 sq ft. Within the Commercial District accounting for 495,206 sq ft.
Despite the contraction in take-up in 2020, occupiers have continued to seek out high quality opportunities with many landlords continuing to upgrade their offers across the region to cater for demand. As such, this has led to expediential rental growth for the past few years across all grades of offices. The highest rent achieved in 2020 was £28.50 per sq ft, a 14% increase from 2019.
Andrew Byrne, Head of Property Group, Professional Liverpool says:
“When we reset the clock on January 1st in 2020 we had much to look forward to, however, as a result of the Covid-19 pandemic, what we saw in 2020 was many occupiers choosing to take stock of the market and delay their occupational strategy.
Despite having specific pandemic related challenges, the market is still dealing with the fundamental issues of previous years; a severe lack of Grade A accommodation and limited good quality availability throughout all markets”.
Julie Johnson Chair of Commercial District BID and BID Champion for the Corporate Sector, says:
“From where we stand in Spring 2021, we can speculate but we have no firm answers. We do know that the desire to rebuild and reinvigorate the city’s economy is ingrained within the Liverpool City Region’s business community, and that ongoing developments, like those within the Knowledge Quarter will help to showcase the city’s excellent reputation in life sciences and health.
“Yet many investors will sit on their hands, even if just in the short term, and that illustrates the work that needs to be done to make Liverpool recovery ready. The need for Grade A office space within the Commercial District remains a significant threat to future growth, and with the SRF highlighting this core demand, there has to be a focus on this.
“The message from Liverpool BID Company has to be to ensure the city is in the right place to attract investment, to support economic activity and be the voice of business. 2020 was a challenging year but the work to rebuild starts now.”