Manchester has the strongest prospects for office sector rental growth in all of the UK regions, according to the latest Net Stock Absorption (NSA) report by real estate advisors Colliers International.
The research states that headline office rents in Manchester rose by three per cent in 2012 – the only prime rental growth across all of the major regional markets.
And the city’s office rental levels will rise further in 2013 due to a limited amount of new space becoming available into 2014, with competition for Grade A space driving further rental growth.
The NSA report adds that the shortage of Grade A space has been caused by businesses trading up in quality and a lack of new-build developments in the economic downturn, thereby causing a steady release of second-hand premises to keep overall vacancy levels flat.
Colliers International believes there will be a steady demand for all types of Grade A office space throughout 2013 because businesses which had mothballed expansion plans are starting to revisit growth strategies.
Rupert Barron, director offices national at the Manchester office of Colliers International, said net stock absorption rose strongly in the second half of 2012 – primarily because of the completion of the new headquarters of the Co-operative Group at One Angel Square.
Availability of office space overall in Manchester fell in the second half of 2012 with a vacancy level across all categories of 16.4 per cent – the lowest since 2008.
This reduction in available space was facilitated by a 53 per cent rise in take-up of vacant premises across the whole of Manchester in the final six months of 2012. Most of this activity was outside of the city centre with about 35 per cent or 160, 726 sq ft on the southern fringe of the city centre.
Activity in the Spinningfields business district accounted for 50,000sq ft of take-up via occupancies at 3 Hardman Square, Vantage Point and Tower 12. A further deal at 3 Hardman Square - in which WorldPay took 22,069 sq ft - demonstrated occupier appetite for the best quality, second-hand accommodation, said Mr Barron.
Office market churn in Manchester will create second-hand space and refurbishment and redevelopment opportunities to potential occupiers.
Mr Barron said 81,000sq ft of office space at 58 Mosley Street was due to be released following the acquisition of law firm Cobbetts by fellow legal practice DWF.
He said there was also good demand for office space in out of town locations with a number of corporates such as Costain seeking space in south Manchester and Jacobs Engineering taking 67,500 sq ft at Park Square, Cheadle.
Demand for smaller units was helping to fill secondary office space as the number of deals for sites of less than 5,000 sq ft rose by 24 per cent in the second half of 2012. Mr Barron added that in central Manchester there were 272 deals in 2012 amounting to an average deal size of 2,900 sq ft.