Experts at DTZ in Manchester review the 2014 commercial property market and look ahead to 2015:
NORTH WEST INDUSTRIAL MARKET
Tony O’Keefe, Director in DTZ’s Industrial agency team comments on the North West’s industrial market:
“The North West Region is well poised to exploit the opportunity of an improving market sentiment, confidence and stability.
A greater collaborative spirit between the region’s City powerhouses of Liverpool and Manchester is a positive step and Manchester is positioning itself, post recession, as the UK’s second city.
Continued growth and confidence in the industrial sector is underpinned by manufacturing resurgences such as Jaguar Land Rover, Halewood and significant investment in infrastructure projects such a Liverpool Superport and Airport City. These are expected to stimulate growth and build upon notable successes over the past year, manifest at Miller developments/HCA Omega scheme at Warrington, which has set the tone for large scale transactional activity in the region.
Dwindling levels of availability of built accommodation has translated into a notable upswing in demand for deliverable sites and where Warrington has led, Harworth Estates, Logistics North scheme at Bolton will follow.
There remains an acute shortage of available, quality industrial accommodation across all size parameters in the North West. Take-up has eroded the overhang of supply from the last development cycle and we have the lowest availability in the country of Grade A units which at current take up levels equates to 1 years supply of quality space. As a result Land sales and pre-let deals have and will continue to dominate occupier take up in the industrial sector.
Demand within the larger logistics market will be driven by further consolidation within the retail sector, primarily as a result of increasing consumer online demand and this trend looks set to continue. We will see these large facilities supported by smaller ‘parcel hubs’ of 50,000-100,000 sq ft to service same day deliver around major conurbations.
Confidence in these market dynamics will see a return to speculative development with 3 notable schemes earmarked for delivery during 2015. Further schemes are also in the pipeline.
Confidence in the wider economy is crucial to the continued success of the Region and no doubt voters will make their views known in the forthcoming general election. Notwithstanding the forecast for the year is one of continued optimism but issues remain in respect of constrained availability of quality buildings and sites of scale to satisfy demand in the short and medium term to sustain a continued recovery.”
Manchester office market
Rob Yates, Director in DTZ’s Office agency team comments on the city’s office market:
“The city centre office market has delivered a stellar performance in 2014 due to strong occupier demand. This looks set to continue into 2015 which will create an interesting supply and demand dynamic as the supply of quality Grade A accommodation will be very limited in 2015. The delivery of One St Peter Square, Argent/GMPVF’s new 268,000 sq ft Grade A development is particularly timely as it will provide the city with much needed supply as 200,000 sq ft of accommodation is available to lease immediately. However, there are already advanced negotiations which could quickly reduce this availability.
Total city centre office take-up to Q3 2014 amounted to just under 1m sq ft, which is in excess of the 10 year average take-up for the full year. The year end take-up is expected to exceed 1.2m sq ft, the highest level since 2010. This highlights the increasing confidence of occupiers as economic recovery continues and the attractiveness of Manchester as location.
Noticeably, inward movers are also being attracted to Manchester. Trader Publishing and Ford Capital have taken 59,416 and 24,753 sq ft respectively at First Street and Towergate Insurance have taken 34,775 sq ft at 3 Hardman Street, whilst Slater Gordon have taken 107,182 sq ft at 58 Mosley Street. These transactions will represent 15 – 20% of total take up, a significant addition to the business sector in Manchester and essential for the city’s growth.
The year has seen a number of large potential requirements, particularly at Barbirolli Square where PWC; Addleshaw Latham; Ernst Young and DLA are considering their position given their lease expiries in the middle of 2017. There are also a number of significant requirement from inward mover considering Manchester as a location given the strong appeal of the Regional Centre as a business location
Developers are responding to the demand and improved market conditions. Four schemes have started on a speculative basis during 2014 with another two schemes due to start in 2015, both on the back of a prospective pre-letting. This new space is desperately needed in the city to meet demand with potential pre-lets in negotiation on 25% of the total. It would not be a surprise to see other schemes also brought to the market for delivery in 2017.”
CORPORATE OCCUPIERS
Gino D’Anna, Director of DTZ’s Professional Advisory Services team, on the situation for corporate occupiers in the North West in 2014 and into 2015:
“The North West property market has performed well throughout 2014, with the office and industrial sectors in particular delivering impressive performances. With further developments planned in the city centre office market and logistics market in Manchester, there is high developer and investor confidence in the region as a whole.
The return of the market has been welcomed by all, but what impact will this have for Occupiers? We are already experiencing a shift in attitudes from landlords in their approach to lease negotiations – in terms of both rent reviews and lease renewals – with a much more bullish approach being adopted on the back of both the strengthening economy and property market in order to prove rental growth.
Although currently limited to prime locations and buildings, we believe that the market will continue to improve throughout 2015, when secondary markets may well also start to react to the improving sentiment.
However, all is not positive as there have been signs of confidence beginning to stall in the face of the forthcoming general election and the uncertainties that will bring.”
PUBLIC SECTOR
“As I anticipated this time last year, proactive delivery was a key theme in 2014 and is likely to remain one for 2015’ – Caroline Baker, Director in Development Consulting at DTZ in Manchester comments on the year ahead for local authorities and the wider public sector in the North West:
“The Autumn Statement left no one in any doubt that the knife continues to cut deep into the public sector spend and many local authorities are in the process of determining which areas they need to cut next. However in parallel, many recognise that they must determine the critical projects in their areas required to attract investment and support growth. For some, in the case of Manchester, this is how to deliver new homes that will attract the professionals to support ongoing growth of the City Region. For others it’s delivering new floorspace in their town centres, that developers cannot due to ongoing issues with accessing development finance, to attract retail, leisure or office occupiers.”
The trend of public sector partners looking to collaborate in terms of accommodation and services has been a strong theme in 2014 which is likely to continue into 2015 and beyond as part of efforts to reduce costs. This trend also has the added benefit of potentially realising new sites that could be used to provide much needed new homes. Scope exists for public sector partners to consider direct development as supported by the Autumn Statement in response to the ongoing chronic shortages of new homes being delivered locally and nationally.”
The Local Enterprise Partnerships (LEPs) have finally started to get the resources needed to support their growth aspirations following the £1.1bn of Growth Deals announced. This will ensure a new focus on strategic investment in critical sub regional projects.”
Andrew Teage, Head of Planning at DTZ in Manchester adds:
“The most recent direction from the Government and their Inspectorate around the need for robust and consistent methodologies to assess objectively assessed housing and employment needs is leading to a whole raft of plans being judged to be unsound or withdrawn from imminent examination or adoption because of concerns they will be also be found unsound. All of which is leading to situation that is singlehandedly failing to deliver the once heralded up-to-date and creative plan –led system. At a time when Local Authorities are being forced to significantly reduce front line services as budget cuts bite, inclusive of decision making development management staff, a growing planning vacuum is being created.
The winners here are surely the landowners and developers who are able to take the right delivery focused planning and development advice that will allow them to mobilise within this vacuum and secure positive land use positions that will maximise land values and receipts.”
