With 2014 witnessing the North West property market surpass the peak of 2007/2008 with take-up of around 1.2m sq ft, the shortage of available city centre buildings to accommodate larger requirements could see the favours fall on the out of town market this year according to property firm, CBRE. However, the firm issues a stark warning that despite traditionally leading at the forefront of the UK’s regional property ‘pack’, Manchester could easily fall behind other cities if it doesn’t up its game this year.
Managing Director of CBRE’s North West business, John Ogden, explains;
“2014 was a transformational year for the North West property market with significant increases in commercial property values, the return of rental growth, and increasing development activity. Of the total 1.2m sq ft of take-up, around 450,000 sq ft was from Grade A lettings including 104,000 sq ft to Slater and Gordon at 58 Mosley Street, 80,000 sq ft to Barclays at 4 Piccadilly Place and Ford Capital and Trader Media at First St with 60,000 and 65,000 sq ft. Following this, we commence 2015 with around 360,000 sq ft of Grade A space available of which some 50,000 sq ft is already under offer and due to exchange Q1 2015, leaving the city in short supply.
“This shortage is further compounded by the fact that the ability to get over 40,000 sq ft in one building over continuous floors is limited to just two city centre options, 1 St Peter’s Square and 40 Spring Gardens. Taking this into account, it is entirely probable that larger requirements could turn their attention to the out of town market. For example, inward investment occupiers or those with bold expansion plans and immediate accommodation needs who may have discounted existing Grade A options and cannot wait for new build, could be tempted out of town. Schemes such as Airport City which has the infrastructure in place and a great team on board, MediaCityUK where 90,000 sq ft of Grade A space is currently available in Orange Tower or Stockport Exchange where 42,000 sq ft is due to start on site in Q1 2015, could all benefit from the present city centre situation.
“This boost to the out of town market would continue on from the successes of 2014 at developments such as Towers Didsbury where we completed 148,500 sq ft of lettings and re-gears last year alone to occupiers including John Lewis and British Airways.
“The sectors we’re watching this year include the social media platforms, gaming, creative and digital media who may require small northern outposts in addition to their London operations. Traditional core occupiers for the North West market such as the financial, law and healthcare sectors could also deliver larger requirements this year too.
“However, as a region we really need to up our game to be attracting these occupiers. We have enjoyed a good run at the lead of the regional property pack through a proactive approach but the other regions have been steadily closing in and are now putting real pressure on the North West to stay ahead of the game. Birmingham has some big speculative developments underway both in the city itself and the fringe areas and Leeds is also breaking ground with pioneering schemes set to attract occupiers’ attention. We can’t afford to be complacent and need Manchester City Council and MIDAS to work closely with our property firms and developers at board level about the strategy for the next two years. We have sites ready here in Manchester such as One New Bailey Street, 101 Embankment, St Peter’s Square and Cotton Building and these need to be getting as much national exposure as possible and a close focus needs to be kept on the big financial institutions for opportunities.
“In terms of rents, 2014 saw rents of £32.00 per sq ft achieved on Grade A lettings, such as Robert Walters at 3 Hardman Street, and the current deals under offer at 1 St Peter’s Square are expected to be on the same level therefore we anticipate further upward pressure on rents during 2015. Rents in excess of £32.00 per sq ft could be achieved on single deals at available Grade A built stock. These isolated cases include buildings such as 3 Hardman Square and Chancery Place where the top floors of both buildings, 22,000 sq ft and 7,800 sq ft respectively, are currently available.
“The investment market is looking good following a strong 2014 when our team alone completed over £500m of investment transactions with major deals including the £132m sale of City Tower for Bruntwood Estates and the £57m acquisition of Chancery Place in central Manchester for NFU Mutual. I’d like to see more inward investment from corporate occupiers and larger TMT businesses who still focus on London but could benefit from the Manchester demographics. 2015 will see continued activity in capital markets but the lack of stock may hold back the take up and occupier market.
“In conclusion, we start the year in an exciting position, building from the success of 2014 with a genuine sense of renewed confidence and optimism throughout the North West property market but there is still a lot to do to ensure that we don’t fall behind the other regional centres.”
