OCCUPIERS with expiring leases will be the key drivers of demand in Liverpool’s office market in 2010, according to agents at CB Richard Ellis.

The city centre recorded its best-ever year for lettings in 2009 of almost 520,000 sq ft in 2009.

However, this figure was achieved mainly thanks to two public sector deals with Merseytravel and the UK Border Agency, totalling 360,000 sq ft.

Strip those two deals out and, according to CBRE, underlying demand was “severely lacking”.

The agency expects demand will improve this year, but believes the aggregate level of take-up is “very likely” to be below the 10-year average.

In its report, it added: “Occupiers with lease expiries are expected to be a key driver of demand during 2010, being well placed to take advantage of favourable lease terms on offer.

“The prime rent in Liverpool fell by £2 per sq ft in early 2009 to the current level of £20 per sq ft.”

Mark Worthington, director of office agency at CBRE in Liverpool, added: “We anticipate increased activity in 2010, with terms beginning to harden in the second half of the year.”

CBRE also reports this week that office transactions in the North West fell by £30.5m during 2009, from £233.9m across 30 transactions in 2008, to £203.4m across 24 transactions in 2009. The largest central business district (CBD) transaction in Liverpool was the Mann Island deal, with Merseytravel taking 140,000 sq ft pre-let on a 20-year lease.

The building is being developed by Countryside and Neptune Developments and was forward funded by Commerzreal in the second quarter for approximately £50m, reflecting a net yield of 7.25%. The other large deal to complete during 2009 was at the landmark India Buildings, on Water Street, which was part of a larger transaction involving the transfer of the debt facility from the Pacific Group to Green Property. The individual lot size of the asset is around £50m.

CBRE added: “The prime yield in Liverpool peaked at 8% at the end of December and steadily moved downwards throughout 2009.

“At the end of the year, prime yields had hardened by approximately 150 basis points, and were in the region of 6.25-6.75%.”