More London-based businesses seeking premises in Manchester means total office take-up in the city is set to exceed more than 1 million sq ft for the fourth successive year, according to the latest office market snapshot by real estate advisors Colliers International.
Colliers said an ongoing strong pipeline of enquiries from businesses in the capital, elsewhere in the UK and indeed abroad seeking both talent and cost-effective solutions to their office space requirements meant a positive outlook for the Manchester office market in the second half of 2017.
London-based firms to have established an office presence in Greater Manchester include international law firm Freshfields Bruckhaus Deringer taking 80,848 sq ft at One New Bailey, Salford and global co-working specialist WeWork announcing No1 Spinningfields as its first UK location outside of London.
The much-heralded ‘tech’ boom is also being increasingly evident in the city centre with almost 40 per cent of new enquiries coming from the technology sector alone as operators seek access to quality talent.
Although buoyant leasing activity has greatly depleted the availability of Grade A office space in Manchester with just 230,000 sq ft available in the city core, and in a ‘double whammy’ the in-build pipeline is also disappearing fast with almost one third of space being constructed having been committed to pre-let occupiers.
With funding for speculative development still hard to come by, just two new developments have started in 2017 - the 180,000 sq ft Landmark Grade A office scheme on the former Odeon cinema site bordering St Peter’s Square and 125 Deansgate (formerly Lincoln House) while three other major schemes at 11 York Street, 100 Embankment and two New Baily Square are due to be underway this year.
Colliers’ reported that office market sentiment remained upbeat with a ‘solid’ take-up of 284,497 sq ft of space in the second quarter of 2017, bringing the total take-up for the entire first half of the year to 492,730 sq ft. The figures for the quarter and the half year represented increases of 37 per cent and 17 per cent respectively on the totals for the same periods of 2016.
A total of 68 deals in the second quarter included five transactions involving in excess of 10,000 sq ft such as existing current city centre occupiers Kaplan Financial and CarFinance247 both relocating to Universal Square.
Stand-out deal of 2017 so far was WeWork securing its 55,802 sg ft at No1 Spinningfields, its first UK location outside of London and designed to tap into Manchester’s expanding media and tech sector.
Manchester’s burgeoning reputation as a major European city was also further enhanced by Swiss distribution business Distrelec selecting Two St Peter’s Square for its European headquarters.
Colliers’ research reiterated that with no new Grade A build completions due in 2018 and demand continuing to squeeze supply, prime rents in central Manchester were expected to continue rising and to hit £40 per sq ft by 2020.
As available Grade A stock remained limited, demand for Grade B office space rose by 10 per cent year-on-year to £27 per sq ft.
Behind the robust nature of the Manchester office market was £170m of investment deals in the first six months of 2017 with the largest transaction being the £66m purchase of CIS Tower by Castlebrooke Investments.
The recent £105m sale of 101 Embankment to M&G Real Estate and the forthcoming purchase of No1 Spinningfields by Schroeder Real Estate for an estimated £200m will enhance investment volumes in the second half of the year.
Peter Gallagher, director, national offices at the Manchester office of Colliers International, said: “Over the next two years there are at least 1.2m sq ft of lease events for more than 3,000 sq ft and a further 1.12 million sq ft facing three or five-year rent review.
“Given the strong pipeline of enquiries and the prospect of several London-based occupiers looking to set up offices in Manchester to cut costs, the outlook for the rest of 2017 looks positive with take-up set to exceed 1 million sq ft for fourth year in a row.”