DTZ Research’s Property Times report for Manchester for Q2 2014 highlights the strongest office take-up in Manchester city centre in 4 years.
Occupier sentiment is much improved and city centre take-up in each of the first two quarters of 2014 were both the highest for nearly four years. Lettings were spread evenly between grade A and grade B deals and totalled 802,000 sq ft for the half-year.
· Deals of note include 82,000 sq ft to Barclays at 4 Piccadilly Place in January in a move to consolidate various operations from around Manchester. Slater Gordon took 104,000 sq ft to consolidate also at 58 Moseley Street following its acquisition of several smaller legal practices around Manchester.
· Several firms have made inward moves to Manchester city centre from either out of town or as part of footloose UK requirements. This includes 35,000 sq ft to Towergate Insurance at 3 Hardman Square, creating 400 new jobs; 25,000 sq ft to Ford Capital at 1 First Street, with an option on a further 40,000 sq ft; and 60,000 sq ft to Autotrader also at 1 First Street in an inward move from Warrington.
· One St Peter’s Square completes to shell and floor very soon, offering around 200,000 sq ft, and there has already been significant interest from potential occupiers. Other future speculative schemes include The Cotton Building (160,000 sq ft), due for December 2015, One New Bailey (120,000 sq ft), The Embankment (160,000 sq ft), and Two St Peter’s Square (156,000 sq ft), due for September 2016.
· Pre-lets on this new space are expected over the next several years ahead of lease expires at Barbirolli Square in 2017, which include PWC (40,000 sq ft) and Ernst & Young (30,000 sq ft). Recent lettings suggest that prime head line rents increased to £32 per sq ft in Q2, and ongoing positive momentum means we forecast further rent rises to £33.50 by 2018.
· Investor sentiment in the regional office markets continued to be strong in the first half of 2014. Some prime yields in the regions are expected to tighten in the second half of 2014, but the weight of money continues to push investors up the risk curve. Secondary yields are set to continue falling this year and next.
· Rob Yates, Director of Office Agency at DTZ in Manchester comments: ” The Manchester city centre market is improving rapidly through increased levels of occupier take-up; 2014 may be a record year with 801,513 sq ft transacted in the first half of the year. Encouragingly the first half of 2014 has seen a number of inward occupiers take accommodation in Manchester, these include Towergate Insurance taking 34,775 sq ft at 3 Hardman Street, Trader Publishing acquiring 60,216 sq ft and Ford Capital taking 24,753 sq ft at Ask’s First Street.
“We anticipate stock availability issues over the next 2 to 3 years whilst the next cycle of development of circa 600,000 sq ft completes. Construction has commenced on three schemes with the fourth likely to start later this year.
“We expect Q3 and Q4 2014 to show continued levels of activity. There are a number of deals due to commit plus larger transactions that may come to fruition. We expect the final take-up figure for 2014 to be as high as 1.2m – 1.4m sq ft.”
