With only 35 miles between Manchester and Liverpool, the North West is forging stronger connections to grow its profile as a centre for investment and development activity. Significant progress is being seen in infrastructure, logistics, manufacturing and the knowledge economy, providing exciting opportunities within the commercial real estate market. Office space in demand The phone started ringing in the last quarter of 2013 with investors wanting lot sizes of £20m+ in Manchester. By the first quarter of 2014 investors were asking for lot sizes of £50m+ – everyone wanted an asset in Manchester. In Manchester prime yields started 2014 comfortably above 6% and ended the year below 5% showing capital growth of more than 15% over the year. Investment volumes are up nearly 100% for the region. By the last quarter of 2014 investor interest had spread to Liverpool where a £50m prime city office asset was traded albeit at a yield well above where Manchester started the year. In Manchester, the more liquid market, the largest prime city asset traded was £300m. There are different dynamics in the two city regions. In Manchester yields could still go lower but performance may be more reliably driven by rental growth as rents look set to rise. They could grow to £40 psf within 10 years, after starting their journey with a tick up to £32 psf from the previous peak of £30 psf, as supply of standing grade A stock is limited and developments have yet to start on site. In Liverpool there is the possibility that rents could rise but performance is more obviously available through falling yields as the differential between Manchester at under 5% and Liverpool above 7% is more than it should be. Strong appetite for industrial space In the industrial market the supply of 100,000 sq ft+ grade A stock is at an all-time low. The position is compounded by the limited number of credible options for build to suit for occupiers. During the course of 2015 we expect to see the market taking steps to address these imbalances with a number of developers bringing forward schemes. Against this backdrop rents are showing signs of growth for the first time in seven years and incentives have tightened to less than half the levels required when the market was at its weakest. There is good demand for industrial investments across all parts of the market, single let, multi let and portfolios, with pricing at or around historic long term averages. With a restricted supply and signs of rental growth yields could harden. Retail sailing ahead Liverpool prime retail rents have remained stable at £265 psf over the last 12 months. Liverpool One’s success is evidenced by strong retailer demand and high occupancy rates, with a successful and flexible approach to tenant mix attracting both shoppers and new tenants. This approach has also been reflected in the restaurant offer in the scheme which culminated in TGI Friday’s paying a record figure to secure the former Pesto site at the beginning of the year. Momentum grows in Manchester There are signs of activity everywhere in Manchester with work going on across the city centre to accommodate the Second City Crossing of the Metrolink following its extension to the Airport, Ashton under Lyne and Oldham. Following the recent city deal it will be extended again into Trafford Park. Momentum is also building along the Corridor an area to the south of the city centre that is host to the universities and the life science and biomedical clusters. Manchester is already a member of the European Super League of biomedical clusters and has been named as the European City of Science for 2016. Over £200m has been invested in the Manchester Engineering Campus and the new Graphene Engineering Innovation Centre. The city is also working to become one of the world's top 20 digital cities by 2020 and is busy building a technology, media and creative eco-system through developments like The Sharp Project, The Space Project and MediaCity UK. At the heart of this there has been investment in an international internet exchange and dedicated fibre connections with the United States. Manchester’s £800m ‘Airport City’ development is set to deliver over 5m sq ft of mixed-use space in and around the existing airport, with infrastructure works and the logistics site well underway. The project is backed and driven through a joint venture between Manchester Airports Group, Argent, Greater Manchester Pension Fund, Carillion and Beijing Construction Engineering Group from China. Liverpool is moving forward Under the strong leadership of Mayor Anderson the city is moving purposefully forward. The port of Liverpool will be transformed during 2015 with the opening of Liverpool 2 which is set to become the UK's largest transatlantic deep sea port and container terminal, which will lead to the development of new supply chain solutions for importers and exporters based in the region and further afield. Liverpool 2 will help reinforce and stimulate investment in the Atlantic Gateway corridor which will ensure that the regional economy makes the most of the infrastructure assets that form part of the Port of Liverpool and the Manchester Ship Canal. The automotive sector has become important to the local economy with investment and production growth at Jaguar Land Rover's plant in Halewood, which produces the Range Rover Evoque and the Discovery Sport, and at Ellesmere Port which is General Motors’ home for the Vauxhall Astra. Liverpool is also establishing itself as a leisure destination, ranking third in the UK. EasyJet has entered a nine year commitment to Liverpool John Lennon Airport and the Cruise Line Terminal adjacent to the heart of the city centre brings over 60,000 passengers to the city from around the world from lines such as Celebrity, Princess and Cunard. To celebrate the 175th Anniversary of Cunard and the long association with the city the Queen Elizabeth, the Queen Victoria and the Queen Mary 2 will all be in Liverpool on 25 May 2015. The North West region has emerged from the tough years post-2007 better, stronger and as determined as ever to punch above its weight. These are exciting times and it seems the best years lie ahead. Our North West team celebrate 45 years in the North West during 2015, having opened an office of J Trevor & Sons in Manchester on 1 December 1970. We are excited about working with our clients current and new to help shape the North West for another 45 years!