Market snapshot

Office Market Pulse Manchester Q2 2016

Take-up in the city centre in the first half of the year totalled 416,115 sq ft, although down 37% on H1 2015, a number of large scale transactions are expected to complete in the second half of the year that should guarantee a year end total of 1m sq ft, keeping in line with the 5 year average. There is currently 1,056,100 sq ft of office space under construction, however with key transactions such as Freshfields at One New Bailey and Swinton Insurance at 101 The Embankment expected to take place in the second half of the year and together with numerous pre-lets over the past 15 months, this will leave only 515,100 sq ft available which equates to just 18 months of grade A supply. 

Scarborough Group’s Middlewood Locks scheme, once completed, should ease the diminishing grade A supply. In addition to this, plans have been submitted for English Cities Fund’s Two New Bailey and Ask Real Estate’s 100 The Embankment which will offer 190,000 sq ft and 164,000 sq ft respectively. 

You can download a PDF version of this Manchester Office Market Pulse, or to read and sign-up to Office Market Pulses from other UK centres, click here.

In this issue:

Activity across Manchester improves in Q2

City centre office take-up for Q2 2016 reached 218,404 sq ft bringing the total for the first half of the year to 416,115 sq ft. Although down 37% on H1 2015, a number of large scale transactions are expected to complete in the second half of the year. That should guarantee a year end total of 1m sq ft, keeping in line with the 5 year average.

Several sizeable transactions occurred in Q2 including, 10,883 sq ft to Mazars at One St Peter’s Square, 32,794 sq ft to the Co-op Bank at Martins House and Bruntwood taking 10,591 sq ft at their own scheme, York House.

Small scale requirements (space sized between 2,000 and 6,000 sq ft) accounted for over half of the transactions completed in Q2, indicating resilience within the SME sector.

The out of town markets continued to perform well with take-up in South Manchester totalling 152,141 sq ft. Warrington saw a 25% increase on the same period last year, with a total of 187,612 sq ft.



Demand to fuel further speculative developments

There is currently 1,056,100 sq ft of office space under construction. In the second half of the year we expect Freshfields to complete on 80,000 sq ft at One New Bailey and Swinton Insurance to commit to taking the entire 165,000 sq ft of 101 The Embankment. Following numerous pre-lets over the past 15 months and upon completion of the afore mentioned lettings only 515,100 sq ft will be available. This equates to just 18 months grade A supply.

Scarborough Group’s Middlewood Locks scheme, once completed, should ease the diminishing grade A supply. In addition to this, plans have been submitted for English Cities Fund’s Two New Bailey and Ask Real Estate’s 100 The Embankment which will offer 190,000 sq ft and 164,000 sq ft respectively.

Brexit will challenge the property market, however we are confident that Manchester’s growing global reputation and resilience will see it have a strong year. With challenges there will be opportunity and while investor appetite is currently split, occupiers in the main are not letting it influence progress.





Key occupational transactions, Q2 2016


Property 

Size (sq ft) 

Landlord(s)/ vendor

Tenant

Martins House
32,794 Serco
The Cooperative Bank
One St Peter's Square
10,883 Elizabeth House Joint Partnership
Mazars
York House 10,591 Bruntwood Bruntwood

Source: Lambert Smith Hampton 

Incentives favour landlords

Prime headline rents in the city centre remained stable this quarter with One St Peters Square and 82 King Street achieving £32.00 psf and £31.00 psf respectively. Given the continued healthy demand for grade A space, we anticipate these figures will rise before the end of the year.

As the availability of grade A space dwindles, incentive packages continue to shorten and currently stand as low as 6 months’ rent free for a five-year lease.

The out-of-town markets saw a marginal drop in headline rents with Metro in Salford Quays achieving £21.50 psf. However we expect to see rents improve in the second half of the year when a number of grade A schemes are introduced to the market.




Manchester office investment activity subdued

After a strong first quarter, investment activity in the Greater Manchester office market slowed in Q2 2016 with volumes totalling £109m, down 61% on the previous quarter, however an increase of 31% on the same quarter the previous year. This was due to the uncertainty surrounding the EU Referendum.

Total activity for the quarter was dominated by Kennedy Wilson Europe’s purchase of Towers Business Park, Didsbury for £82m, reflecting a net initial yield of 6.7%. Other transactions included Palace Capital’s acquisition of Boulton House, Manchester for £11m and the purchase of 40-46 Princess Street for £7m by a private family trust.

In response of Brexit, investors are expected to exercise caution but as we move into the second half of the year we are likely to see investors revert back to more normal behavior.


Key investment transactions, Q2 2016


Property 

Value (£m) 

Investor

Vendor

Towers Business Park, Didsbury 82 Kennedy Wilson Europe Lone Star
Boulton House, Chorlton Street, Manchester 11 Palace Capital Regional Properties Ltd
40-46 Princess Street, Manchester 7 Private Family Trust Rockvale Investments Ltd

Source: Lambert Smith Hampton 

Want more information about this Snapshot?

Josh Levy
Josh Levy

0161 242 7061

Email me

Regions

Contact us now

Josh Levy
Director - Office Agency

0161 242 7061

How can we help?

Submit