Market snapshot

Office Market Pulse Manchester

The city centre has had a promising start to the year with an increased take-up of 4% on Q1 2014 at 318,000 sq ft.

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In this issue:

Take-up sees promising start in Q1 2015

The city centre has had a promising start to the year with an increased take-up of 4% on Q1 2014 at 318,000 sq ft.

Pre-let activity of new build grade A offices, by existing Manchester based occupiers, represented 29% of activity in Q1.

There has been an increase in higher quality lettings and a 50% reduction in secondary space compared to Q4 2014.

Notable pre-let activity in both grade A and refurbished space include relocations from PWC, EY and Bupa. Rental Cars added a further 38,000 sq ft to its operation at 35 Fountain Street.

City centre grade A space take-up accounted for 123,000 sq ft, 37% of the total sq ft.

4 deals in excess of 10,000 sq ft accounted for 73% of activity in South Manchester.  

Supply pipeline at an all time high

City centre, grade A supply pipeline is at an all time high since 2008 due to the announcement of pre lets and an increase in speculative development.

Refurbished stock has reduced by 15% compared to Q4 2014 - reinforcing the focus of occupiers on higher quality accommodation.

In the absence of significant new build developments in the out of town markets, supply has continued to fall across all grades. Bupa’s pre-let of 120,000 sq ft in Salford Quays will substantially increase supply in the Anchorage.

Key Manchester office transactions


Property  Size Landlord(s)  Tenant / Purchaser 
2st Peter’s Square
41,628 sq ft
Mosley St Ventures
EY
1 Spinningfields
49,406 sq ft
Allied London
PWC
35 Fountain Street
37,845 sq ft
IVG
Rental Cars
55 Princess Street
17,271 sq ft
Cube Real Estate
Trowers Hamlin
Kingscourt, Wilmslow
18,266 sq ft
 Orbit
 Citation
Trident Manchester Airport  38,000 sq ft Property Alliance Group Quindell
Soapworks 54,816 sq ft Carlyle Group  Home Office
Harbour City  120,000 sq ft Peel Land & Property

Bupa

Source: Lambert Smith Hampton

Incentives continue to reduce

Prime grade A headline rents remain unchanged at £32.00 per sq ft. However, some quoting rents are pushing up to £33-£35 per sq ft.

Landlords are beginning to surrender surplus tenant space, which is currently under rented, in order to set new rental tones in their assets.

Incentives continue to reduce across new build and substantially refurbished space. A rental incentive of 9-12 months on a five year term is now the ceiling in the majority of cases.

Within South Manchester the lag in supply delivery is stabilising rents and forcing incentives downwards.

New build rents in the out of town markets are now quoted in excess of £20 per sq ft.

Office investment peaks in Q1

Investment activity in the Manchester office market in Q1 totaled £455.61m which is almost four times higher than the same period last year and up 168% on the previous quarter. A number of these transactions were for stock brought to the market at the end of 2014. However, there has been very little stock so far this year which may impact on the level of deals going forward.

Significant deals included:

• M&G Real Estate’s purchase of 3 Hardman Square for £91.73 m, reflecting a net initial yield of 5.79%.
• Kames Capital’s acquisition of The Hive in the Northern Quarter for £16.75m, reflecting a net initial yield of 7.25%.
• Deutsche Asset & Wealth’s purchase of Norfolk House from M&G Real Estate for £16.772m, reflecting a net initial yield of 6.62%.
• Credit Suisse purchased 3 office buildings in the city centre for a combined £32.92 million.
• Ardstone’s acquisition of Pall Mall Court on King Street for £19.1m, reflecting a net initial yield of 7.02% 

Regions

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