While the recovery in the economy and commercial property market may be slow, there is a new symbol of progress in Bradford.

This is the £45 million Southgate scheme, recently topped out, which will give the city centre a 23,225 sq.metres (250,000 sq.ft.) landmark building to become the headquarters of Provident Financial, a company steeped in the local traditions.

The development is by the Irish company McAleer & Rushe and the company’s Stephen Surphlis commented: “Southgate is one of the few major developments in the North of England progressing in the current market and it will be handed over to Provident in September.” There will also be a 200 bed Jury’s Hotel.

Alex Munro of Knight Frank said: “This is a great example of the public and private sectors working together. This is a crucial development for Bradford and will create hundreds of jobs for the city.”

It comes at an interesting time for the area with a new emphasis on the Leeds region, the focus of the promotions at the recent MIPIM event. It covers the ten major areas and stretches towards Manchester, Cumbria and Goole, and is an area with a diverse economy that includes engineering in Huddersfield; Barnsley and Wakefield for logistics and Harrogate with conferences.

Leeds is, of course, a major financial and legal centre and the region has 242,000 in financial services jobs. The problem, as in some other regions, is the percentage of the economy and employmen dependent on the public sector. It has certainly been a major factor in the office market and remains so. For example, Leeds City Council required 12,077 sq.metres (130,000 sq.ft.) but like other government plans, this is on hold.

A potentially powerful influence on the market is starting to appear as banks push developers into selling assets to run down their borrowings. In the first quarter in the UK, institutional investment, fed by this source of property, topped £1.1 billion, said LSH. The firm’s Ezra Nahome said: “In what is a traditionally quiet period for UK institutional investors, they have dominated buying activity, accounting for 42% of the value of total purchases. This is the most dominant buying position ever recorded. Many of the sellers have been highly geared property companies.” There has also been some astute selling such as London & Stamford, one of the first companies to buy into the upswing, selling its 12,032 sq.metres (129,514 sq.ft.) 1 Whitehall Riverside, Leeds, to the NFU Mutual Insurance Society for £51.3 million. The property has seven tenants, including Grant Thornton and Cobbett’s LLP. The driving force behind London & Stamford are Patrick Vaughan and Raymond Mould.

Having an arena is something of a status symbol for many cities and this is equally true of Leeds where plans have been unveiled for a 13,500 seater ‘super theatre’ design with a scheduled opening of 2012.

It will be managed by SMG Europe on a 25 year lease and is being supported by Jacobs, a provider of construction and building services, Leeds City Council’s strategic partner. The determination of a planning application made in November 2009 is expected soon. The arena is seen as a catalyst for the regeneration of Leeds Northern Quarter, including the Merrion Centre.

Jean Dent of Leeds City Council said: “The arena will have a huge impact in raising the profile of Leeds and the surrounding city region both nationally and on the European stage. Studies show there is massive untapped demand for a facility of this kind.”

Leeds City Council has put the 3,159 sq.metres (34,000 sq.ft.) building, which is let to the BBC and the Leeds College of Music, on the market through Cushman & Wakefield for £6.4 million, a yield of 6.5%. The BBC has a break clause in 2021.

The recovery in regional markets such as Leeds and Sheffield will come from a steadily decreasing supply of offices rather than increased demand.

That is the view of Jones Lang LaSalle (JLL) who believe that office supply will start to tighten this year in most key regional markets, including Leeds. The agent expects finance for speculative development to be“extremely limited between now and the end of 2011 and as a result, selective shortages are set to appear by 2012, further widening the gap between prime and secondary markets.”

JLL’s Jeff Pearey commented: “Limited Grade A supply will ease the downward pressure o rents. In Leeds, prime rents remain stable at £280 a sq.metre (£26 a sq.ft.) and to date there has not been any softening of these.”

JLL’s figures are that office supply in Leeds dropped by 5% to 135,634 metres (1.46 million sq.ft.) in the last quarter of 2009 as take up outweighed the small increase in second hand stock. On the other hand, the supply of Grade A space remained relatively tight with a 5.5% vacancy rate.

Pearey said: “While it is difficult to generalise on incentives as they vary significantly, incentives for prime city centre space are unlikely to be pushed out any further this year. One or two significant deals could change the supply picture dramatically.”

The view from Knight Frank’s Guy Cooke is one of cautious optimism with total lettings in 2009 at 37,160 sq.metres (400,000 sq.ft.), which is below the 10 year average.

Cooke said: “That was not a bad result in a market underpinned by many small deals in the absence of corporate moves. The number and quality of the enquiries has steadily picked up during the past six months and rentals for the best space are holding up.”

He noted that there were some positive signs, such as a number of occupiers who have been out of the market for some time reconsidering options in the light of lease expiries/breaks and seeing the bottom of the market.

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Two sales, (a retail park in Leeds and a large shed in Wakefield) illustrate the buoyancy of the investment market. Henderson Global Investors has sold the 11,296 sq.metres Leeds Retail Park for £56.63 million to the UK Commercial Property Trust, which is the largest trust of its kind in the UK. This is a net initial yield of 6.15%. The park has many of the top retail outlets in the UK, such as Comet and Harveys.

Henderson’s Michael Neal said: “We intend to use the proceeds to acquire new assets where we can identify opportunities to enhance return to our investors.” A private purchaser has paid a client fund manager of CB Richard Ellis £5.6 million for the 8,361 sq.metres warehouse on Wakefield Europort, which is let to Scottish Power, through Knight Frank. The initial yield is 7.5%. Knight Frank’s Rebecca Farnsworth said: “We received good interest from a range of purchasers, which shows the revival of investment demand if the product and location are right.”

Finance Yorkshire, the new £90 million fund to help business in the county, has leased space at Sterling Capitol’s Capitol Park, Barnsley, for its headquarters. The park has offices, an hotel, a pub and seven occupied hybrid units as well as space for a substantial expansion of the industrial and office buildings.

A consensus has emerged between the leaders of UK cities and the major property developers that the cities will need more powers to raise finance if they are to compete effectively with continental European rivals. Andy Topley of Creative Sheffield said that this would “make a big difference, because the major cities have changed dramatically in the way they approach economic development over the past 5 to 10 years. They have a better understanding of what is required by the private sector and their own economies.” In the case of Sheffield it has moved from dependence on a few industries to a situation where it reflects the wider UK economy. Key changes have been supported by the private and public sectors.”

A surprisingly bullish forecast for large sheds has come from Knight Frank with the view that the favourable market in Yorkshire could be returning.

Knight Frank’s Owen Holder commented: “Occupiers of larger sheds are beginning to look in Yorkshire again, driven by the level of deals they can pick up on buildings built speculatively during the “boom” years.

It is a question of sheer economics because Holder’s calculation is that deals now “can represent savings on properties of up to 65% compared with deals being done two or three years ago.” Another advantage is that tenants can negotiate substantial rent free periods of up to three years plus a contribution to fitting out costs.

The view is that this cannot last long although there is currently an abundance of choice as tenants hold all the cards at the present time. Even on shorter leases there could be savings that would cover the capital expenditure of a move.

Although there are limited opportunities to purchase, a serious occupier doing a deal without bank finance has a definite chance of completing a deal.

Holder welcomes the raising of the exemption threshold on empty rates to £18,000 (from £15,000) but adds that “it is disappointing that the Chancellor decided not to enact the 50% relief for all vacant properties which was possible under the current Act.”

In his view the recovery of the commercial property market is being jeopardised by the controversial tax on empty property and some businesses will continue to demolish existing unoccupied buildings. Another concern is that faster economic growth will mean a reduction in the number of properties on the market in Yorkshire and the rest of the UK.

Design quality is being placed at the top of the list for regeneration and housing in Wakefield.

This is the message from Sir Bob Kerslake, Chief Executive of the Homes and Communities Agency.

Wakefield already has an emerging success in its Waterfront scheme, where the local council has leased 1,394 sq.metres (15,000 sq.ft.) on the CTP St James’s project and sub let it to the mail order company Redcats.

Oliver Quarmby of CTP St James’s said “The arrival of our first business occupier is a vote of confidence and will prove to be a catalyst for the rest of Phase One where we have two further office buildings of 3,066 sq.metres (33,000 sq.ft.).”

He added that the apartment building is now fully occupied and there has been a good deal of interest in the retail space.

Wakefield is also getting other significant developments, such as Merchant Gate where the first stage is due for completion this summer. It will have offices, leisure/retail space, a residential building, multi storey car park and new railway station.

The Trinity Walk retail project of 49,980 sq.metres (538,000 sq.ft.) is also moving ahead with the market hall designed by David Adjaye now open and the rest due in Spring 2011.

The first quarter of 2010 has seen a positive start to the year for out of town office space. Nearly 61,000 sq.ft. of such space has been let or sold in Q1 and Carter Towler was involved in 45,000 sq.ft. of those transactions, including the 4 biggest; the 10,500 sq.ft. Nelson House, 6,000 sq.ft. at Rubicon Square, and 2 lettings of 6,000 sq.ft. and 5,189 sq.ft. at Armley Court. Pete Bradbury of Carter Towler said, “Whilst the out of town office market in Leeds has been very poor over the last 2 or 3 years, it is pleasing that we have been able to buck the trend and complete these very important lettings for a number of our clients.”

There is a considerable sense in the major towns and cities of the Leeds region promoting a single image as a good place for business.

The point is that each of them has certain strengths, whether it be Leeds in law and finance, or Barnsley in engineering. It was always so with various parts of Yorkshire specialising in different aspects of the woollen industry.

The emergence of dynamic city regions will surely help to bring back real municipal pride and a desire to beat other such regions, whether it be Greater Manchester or parts of continental Europe. This fits with political moves to give more power, including that of raising finance, to the regions.

The great days for the UK economy were at a time when major regional cities were independent and not beholden to what happened in London. Those were the days of the provincial stock exchanges with their ability to raise finance for local companies.

Local entrepreneurs were proud of their cities and outbid each other to finance facilities, such as libraries and sports clubs. Many still do. What we want to foster is the competitive spirit which drove them in the Victorian period to build the greatest town halls and railway stations.

Move the axis of the UK economy away from the heady atmosphere of the City of London and watch the positive results that will flow.