The shortage of Grade A office space in Manchester and a lack of Government tax incentives for inward investors could damage Manchester’s plans to be one of the world’s top 20 digital cities by 2020, according to research by real estate advisors Colliers International.

The report entitled iQ Media and Technology confirms Manchester as a strategic location for tech businesses in the UK with companies ranging from multinationals such as Google, IBM, Fujitsu and Cisco to fledgling operators.

Manchester is second only to London in the number of start-up companies in media and technology in the UK with about 300 newly-formed creative and digital businesses and support organisations in locations such as The Sharp Project, Tech Hub and The Northern Quarter.

And Greater Manchester is home to MediaCity UK at Salford Quays - the 200-acre complex that accommodates 26 departments of the BBC, ITV, global operators and about 50 creative small businesses with shared digital infrastructure and state-of-the-art technology. MediaCity alone is forecast to be home to some 15,000 jobs by 2015.

The city and its hinterland benefits from global awareness created by interest in Manchester City and Manchester United football clubs, the international airport serving 190 destinations, its talent pool from four universities and next generation broadband.

But the report also highlighted the latest Net Stock Absorption (NSA) research by Colliers International that showed Grade A office space in Manchester had hit a five year low after falling by one third in 2013.

The NSA analysis showed that available office space in the city core was about 150,000 sq ft - 75 per cent down on the 600,000 sq ft available in December 2009.

And the report stated that likely leasehold transactional activity in 2014 was set to reduce availability of Grade A space in central Manchester to a six-year low.

A lack of tax incentives from the Government to lure potential inward investors and Manchester being a victim of its own success with increased demand for a declining amount of office space leading to rising rental levels were other issues likely to affect the city’s ambitions to be a global digital power.

Nick Nelson, associate director, national offices at the Manchester office of real estate advisors Colliers International and a specialist in the telecoms, media and technology sectors explained that Manchester’s achievements in media and technology are in part because of the quality and breadth of its digital infrastructure – Manchester is the only UK city other than London to boast an international internet exchange and has dedicated fibre connections with North America.

The city has also been selected as the preferred location for a test bed of ‘Project Digital’ which will see more than  200,000 sq ft of offices across 40 buildings linked with cutting edge technology and which will hopefully come to fruition later in 2014.

Mr Nelson said the city was also able to source skilled staff for media and technology businesses from one of the largest student populations in Europe with about 100,000 students at four universities and some 30,000 graduates each year.

He added that Greater Manchester was sustaining this pipeline of skills via initiatives such as the development of a £10.4m university college at MediaCity UK that is due to open in September 2014.

In terms of rental levels real estate for the media and technology sectors, average rents range from £9 per sq ft in the Northern Quarter and The Sharp Project to £20.00 per sq ft-plus at MediaCity – with vacancy rates in those locations lower than the Manchester average overall.