Newcastle secured largest regional office letting for Q1

Avison Young’s Big Nine report shows that the biggest deal outside of London for the first quarter in 2025 was the Department for Work & Pensions’ 170,000 sq ft pre-let at 1 Pilgrim Place.

The deal was facilitated by Avison Young.

The report charts regional office activity from Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Liverpool, Manchester, and Newcastle.

Take-up in these cities has reached 2.1m sq ft, which is in line with the 10-year quarterly average.

1 Pilgrim Place has more than 400,000 sq ft of grade A office space, and the DWP’s letting along with Network Rail agreeing to take 109,000 sq ft at Princes Exchange in Leeds means that the government and services industry has dominated Q1 office deals, with around a 25% share.

Another trend noted in the report is a strong uptick in out-of-town demand, with five deals in excess of 25,000 sq ft – the highest quarterly take-up since Q3, 2021.

These deals were mainly in the manufacturing and industry segment, accounting for 18%.

Avison Young has indicated the demand for out-of-town space could be driven by cost efficiency, as prime city rents continue to rise, or due to demand for larger, more flexible spaces.

Across the nine cities, prime rental growth rose quarter-on-quarter by 2% to £39.53 per sq ft, reflecting annual growth of 6%.

Leeds (6.3%) saw the most significant rental increases to £42.50 per sq ft, while Bristol remains the city with the highest headline rent at £48 per sq ft.

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Despite rising rates, the regional markets are ‘severely constrained’ in terms of new-build space completing this year.

A different report, from Knight Frank, also highlighted this point, noting that the recently completed Maker & Faber buildings in Sunderland are two of only four new-build office schemes completing and available to rent this year outside of London.

The two towers have delivered 157,000 sq ft of grade A space into a sparsely populated market, making up a large chunk of the 350,000 sq ft of newly built office space available.

Returning to Avison Young’s report, it notes that demand for new and refurbished space is on the rise, with occupiers seeking grade A sustainable spaces, with 48% of 2025 development completions already pre-let.

It also notes that the market is leaning towards ready-to-go fitted offices, with good wellness and sustainability credentials.

The average rent-free period is also decreasing, down to 19 months from the average 21 months the previous year on a 10-year lease, indicating that landlords no longer need to offer a longer rent-free incentive to secure tenants.

Paul Broad, managing director of Avison Young’s National Offices team, said: “It’s encouraging to see that regional office markets are holding steady, showcasing stability and resilience in what is otherwise a turbulent economic outlook.

“There is a clear shift towards quality space, with occupiers seeking well-located offices, fitted out with sustainability in mind, with almost half of new developments already pre-let.

“It’s also great to see out-of-town markets continuing to gain momentum, as occupiers look for a cost-effective, accessible alternative to city centre rent hikes.

“We can really see confidence returning to the regional office markets, and we expect this to continue into Q2 and beyond.”