Commercial property is a long-term game, and the Yorkshire market rewards those who understand it properly. The broad strokes are familiar: Leeds dominates, York and Sheffield carry national relevance alongside other, more local markets. and industrial and logistics have been the main capital and rental growth story for several years.
But the picture within each sector is more detailed than the headline narrative suggests and getting the detail and market insight right matters a great deal when deploying capital.
Yorkshire Retail Property
The retail market is the sector that has been written off most enthusiastically and is now showing some interesting (albeit localised) signs of recovery.
The structural shift caused by online retail, accelerated dramatically by the pandemic, caused value in secondary high streets and shopping centres to fall dramatically, continuing a trend started in the early 2010s. This is not a temporary problem; it is the new baseline.
However, within the major Yorkshire centres, the position is stabilising.
CoStar data suggests vacancy rates for high street and out-of-town retail parks in Leeds, York and Harrogate will sit at around 2 to 2.5% over the next three years, below the national average of 3 to 3.5%. Shopping centres present a different picture: vacancy rates are currently sitting at around 12% in York and Harrogate, but are expected to decline towards 7% over the same period.
Rents are likely to remain flat or fall slightly through 2026 before recovering from 2027 at approximately 2% per year. Yields, which moved from 6.75% to 8% + on prime assets in the region over the past five years, are expected to compress gradually.
For investors with an appetite for complexity and patience for a long-term view, the current yield environment is more interesting than it has been for a decade and a half or more.
The Leeds Office Market
The office market tells a slightly different story depending on where you look. Leeds is the only market of significant national scale in Yorkshire, and it has navigated the post-pandemic reappraisal of office use with more resilience than many predicted.
The pivot back towards in-person working as opposed to working from home (typically now three days per week in most organisations), has led to a gradual restoration of confidence in the sector and renewed demand within relatively narrow parameters.
Space is being used differently now, with more emphasis on collaboration, breakout areas and flexible working environments. Thus, modern accommodation with good transport connections, amenities, environmental credentials and pleasant working environments are the vogue.
Capital values have fallen from around £200 per square foot in 2020 to around £160 by 2024, and have since recovered to approximately £175.
Prime yields moved out from 6.25% to 7.5% and have since pulled back to 7%-7.25%. Between now and the end of 2028, we expect further yield compression and rental growth of around 3% per year in both prime and secondary stock, as take-up increases and the new development pipeline remains constrained.
The key distinction is quality: well-located, well-specified, energy-efficient space is letting well. Secondary offices without meaningful investment will face sustained pressure.
Industrial and Distribution: Yorkshire's strongest commercial story
Industrial and distribution remains the most consistent story for commercial property in Yorkshire.
The region is one of the most important logistics locations in the UK. It’s location at the midpoint between the North and South of the country, underpinned by the motorway network, proximity to major ports and consumer centres has created structural demand that shows no real sign of weakening.
The Yorkshire 'Golden Triangle' formed by the M1, M18 and M62 motorways has, in recent years, attracted the likes Amazon, ASOS, IKEA and Marks and Spencer to buildings of over one million square feet, confirming the region's national importance as a logistics hub.
Supply of smaller units is generally tight. Building costs and development land values have risen to the point where speculative development of sub-25,000 square foot units is difficult to justify economically, and older stock is reaching the end of its useful life faster than it is being replaced.
This creates a supply-demand imbalance that favours investors in modern, future proofed existing stock. CoStar forecasts 3% rental growth per year over the next 3 years; we think the real number for the best space in Yorkshire will exceed that.
Data Centres
The mad rush towards AI means that data centres are worth watching for investors. Yorkshire's power infrastructure, particularly relative to the congested South of England, is a genuine advantage, and the AI-driven increase in demand for data centre capacity is not a short-term phenomenon.
This is an emerging area for commercial property investment in the region, and one we expect to see considerably more activity in over the next five years.
Landowners and investors with sites near existing grid infrastructure are well-placed to benefit.
Alternative Commercial Assets
Alternative assets have been a growing part of many of our clients' portfolios in recent years: healthcare properties (including care homes, veterinary practices, GP surgeries and dental practices), EV charging infrastructure, battery storage, build-to-rent and hospitality assets have all been popular.
These tend to be more specialised, require specific sectoral knowledge to assess, and carry different liquidity profiles to traditional commercial assets. But they offer strong and often index-linked income, and their performance is tied to structural economic trends rather than cyclical sentiment.
For a balanced portfolio, they serve a real purpose.
Best locations for Commercial Property Investment in Yorkshire
York is our strongest conviction call for investors over the coming years. The York Central mixed-use regeneration project, involving £2.5 billion of investment and delivering 2,500 new homes alongside significant commercial, retail and leisure space, will benefit the surrounding areas as well as the city centre.
Investors able to position themselves ahead of the completion of this infrastructure investment are likely to achieve improved rents and capital values over the medium term.
On the other hand, Harrogate gives us pause for thought. Underinvestment in infrastructure and complex planning requirements are a concern, and the absence of a clear development masterplan for the town is an issue. Investment is needed to maintain its relevance.
Commercial Asset Management
The key differentiator that determines whether a commercial portfolio performs over the long term is active and targeted asset management.
Buying well is necessary but not sufficient. Getting to know tenants, understanding how their businesses are performing and anticipating what they need before they start looking elsewhere is the difference between a lease renewal at market rent and a void.
A properly structured five-year business plan for each asset, tracking lease events, identifying opportunities for expansion or reconfiguration, and actively managing costs around voids, refurbishments and business rates, consistently outperforms a passive approach.
It is less glamorous than the acquisition, but it is where the real value is built and protected over the long term.
If you are looking to acquire or actively asset-manage a commercial property portfolio in the region, contact us at info@tppguk.com or call +44 (0) 1423 324716.
