Concurrently, while the regional office vacancy rate has increased very slightly from 10% in 2019 to its current 11% due to the Covid-19 pandemic, it remains extremely low in a historic context as there is an undersupply of office space within most regional markets. They are therefore now at significantly less at risk of downward rental pressure than they were during 2009, according to Savills, evidenced by the fact that many regional markets experienced prime rental growth during 2020 and Manchester even saw rental growth during Q1 2021 with top rents increasing from £37.50 to £38.50 sq ft.

Richard Merryweather, joint head of UK investment at Savills, comments: “The low vacancy levels and very limited new development in core markets continues to attract a broad range of domestic and overseas investors. Prime yields in the key regional cities have held firm and value add investors are looking to take advantage of the very limited development pipeline.”

Savills April Market in Minutes also reports that investment in the industrial markets remains very strong: volumes in Q1 2020 reached £3.2 billion, the third highest quarterly total in the last 20 years. This demand is set to continue with the strong occupational market appealing to investors, with Q1 2021 recording occupier activity 34% above the long-term average.

Clare Bailey, director in Savills commercial research team, adds: “Demand for UK offices, both from occupiers and investors remains strong, despite the events of the last year. They are, however, having to share some of the limelight with industrial assets, which given record levels of take-up in the face of the ecommerce boom, have joined them at the top of buyers’ shopping lists.”