Major shopping developments could play a key role in promoting much-needed office developments in Sheffield city centre, according to office expert Guy Gilfillan.
Mr Gilfillan was speaking following the publication of Lambert Smith Hampton’s annual Office Market review.
He believes Sheffield has significant potential, despite a 45 per cent fall in the take up of office space in the city centre – worse than in any of the 34 other regional centres north of Luton.
To make matters worse, the city has seen no office developments start in the past two years and now has the lowest percentage of available office space of any UK office centre.
“It’s very difficult to explain to potential investors that, if you have no stock, by definition, you are not going to get take up.
“The danger is that funds and institutions will look at the market and say take up has fallen off a cliff – why should we put any money into Sheffield. The big challenge is to explain why it stacks up, potentially, as a very strong investment opportunity.”
That challenge isn’t made any easier when prime rents have stuck at £20 a square foot for two years – the same level as Newcastle, where there have also been no new developments during the past year, but £4 less than Leeds and £10 less than Manchester, where development and take up are increasing.
One answer, according to Mr Gilfillan, might be if the current redevelopment of The Moor and the stalled Sevenstone project were to incorporate offices at first or second floor level and above.
“I think we need to look at the office development potential within both of these developments, as we move forward,” he says.
“The market dynamic is such that there is a significant opportunity to build ground floor retail or leisure space and build commercial space above that.”
Mr Gilfillan also sees strong possibilities for offices to be built on the third St Paul’s Place site and a potential site on the other side of the central office area to cater for occupier-led enquiries.
Last, but not least, demand will be fuelled by the expiry of existing leases.
Mr Gilfillan reckons leases on 900,000 sq ft of currently occupied offices are due to expire between now and the end of 2016.
“That’s a huge volume of potential and if we can tap just 10 per cent of that, it should be enough to kick off 100,000 sq ft of development. Assuming a pre-let, there could be 150,000 sq ft of potential development activity,” says Mr Gilfillan.