Market snapshot

Office Market Pulse Manchester Q2 2014

The Greater Manchester office market has seen a marked increase in activity in Q2 2014 with take-up totalling 758,263 sq ft, 78% above the previous quarter. Substantially refurbished stock continues to dominate due to an acute shortage of grade A supply.

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In this issue:

Increase in take-up for Manchester office market

Take-up in the Greater Manchester office market totalled 758,263 sq ft in Q2 2014, a 78% increase on the 425,420 sq ft recorded in Q1.

Substantially refurbished stock continues to dominate market activity with grade A accounting for just 29% of total take-up in Q2. This is due to the acute shortage of prime available stock.

Activity in the city centre was up 55% on the previous quarter. The largest transaction to take place was at 58 Mosley Street, with Slater Gordon taking 104,312 sq ft of space.

Following an initial slow start to the year, the out of town market witnessed a substantial increase in activity, with take-up totalling 270,624 sq ft, compared to 111,546 sq ft in Q1. Small scale requirements continue to dominate with only three deals over 10,000 sq ft taking place.

For a detailed breakdown of Q2 2014 take-up by grade, please click here or on Chart 1 to the left of this article.

Significant Manchester office lettings Q2 2014

Property 

Size (sq ft)

Landlord / Vendor  Tenant / Purchaser 
58 Mosley Street, Manchester

104,312

State Street     Slater Gordon
Manchester Business Park      

38,507

Hutchinson 3G UK Ltd Costain Ltd
First Street, Manchester

24,753

Ask Developments   Ford
Manchester Business Park

23,543

Goodman Emirates
 Crossgate House, Sale   

 11,688

 Orbit Developments  NHS

Source: Lambert Smith Hampton

One St Peter’s Square to provide an initial boost to grade A supply

Supply of grade A stock continues to remain subdued accounting for just 16% of total availability.

One St Peter’s Square will bring 207,000 sq ft to the market in Q3 (73,000 sq ft already pre-let to KMPG) but with continued strong demand for prime city centre stock, it is unlikely this will remain on the market for long.

The shortage of prime city centre stock has been the catalyst for a number of speculative developments announced earlier this year.

Works have begun on site at the Cotton Building, which will provide 160,000 sq ft of grade A space in Spinningfields in early 2016. Allied London’s One Spinningfields and English Cities Fund’s 1 New Bailey Street are due to commence works later this year, bringing an additional 387,000 sq ft to the market in late 2016/early 2017.

For a breakdown of Q2 2014 office supply by grade, please click here or on Chart 2 to the left of this article.

Prime city centre rents rise due to shortage of stock

City centre headline rents have increased by £1.50 to £31.50 per sq ft this quarter due to the continued lack of prime stock.

Out of town rents remain unchanged at £19.00 per sq ft but MediaCity continues to attract a small premium with headline rents of £21.50 for grade A accommodation.

Due to the increase in demand and shortage of stock, we have seen prime incentives start to harden, down from 18 months’ rent free for a five year term to around 15.

For a breakdown of Q2 2014 office rental values, please click here or on Chart 3 to the left of this article.

Office investment volumes up over 600% on the previous quarter

The Manchester office investment market witnessed a bumper quarter in Q2 2014, with investment volumes totalling £549.9m, significantly higher than the £74.5m recorded in Q1 2014. However this was down to two major deals within the city:

M&G Real Estate’s acquisition of the two RBS buildings within Spinningfields, for £320m, reflecting a net initial yield of 4.80%

Schroder Property Investment Management’s purchase of City Tower, for £132m, reflecting a net initial yield of 6.99%

Other significant deals included Gateway House (£26 million), Direct Line House (£24.3 million) and St James’s House (£20.7 million). We expect the strong investment levels in Manchester to remain high through the second half of the year, as investors - particularly UK Institutions - continue to move away from an over-heated London market to seek better value in the regions.

What does this mean for the market? Find out in UKIT Q2 2014.

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