CoStar Analysis: The winners and losers In the HMRC office shake-up

By Jamie Campbell - Thursday, September 07, 2017 13:32

HMRC’s decision to consolidate its national network of offices into 13 regional hubs provided a major boost to the chosen cities. However, large-scale tax office closures are expected to have a negative impact on fundamentals in some smaller cities and out-of-town submarkets, according to CoStar’s latest analysis.

Croydon’s hub was among the first to be announced last year, with HMRC taking 184,000 sq ft at the newly delivered Ruskin Square. It was the largest lease deal in Croydon since 09Q4 - and the first office building over 100,000 sq ft to be constructed in the town since 2012.

Croydon’s hub was among the first to be announced last year, with HMRC taking 184,000 sq ft at the newly delivered Ruskin Square. It was the largest lease deal in Croydon since 09Q4 - and the first office building over 100,000 sq ft to be constructed in the town since 2012. The decision to base Bristol’s hub (107,000 sq ft) was also confirmed last year, allowing construction to commence on the largest office building in Bristol’s Eastern Fringe submarket since 2010. Announcements have continued this year, with the hubs in Cardiff, Edinburgh, Liverpool, and Leeds going through in recent weeks and confirmed by CoStar News. All are based at new developments in central locations. 

However, the office consolidation looks likely to be detrimental to many smaller cities and out-of-town submarkets.

For example, Bootle (in the Sefton submarket of Liverpool) is expected to see almost 400,000 sq ft of office closures. This is forecast to more than double the Sefton vacancy rate by 2019, particularly challenging when occupier demand in the area has been relatively weak in recent years.

High levels of negative absorption are also expected in other out-of-town submarkets such as Outer Cardiff, South Lanarkshire, and Sunderland, with large tax offices closing in Llanishen, East Kilbride, and Washington, respectively.

But it’s not all doom and gloom in the submarkets affected. Many offices in out-of-town submarkets have been converted to other uses in recent years, especially in the likes of Liverpool and Bradford. The continuation of this trend could help vacancies rates recover quickly.

jcampbell@costar.co.uk

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