Market snapshot

Office Market Pulse Manchester Q4 2017

Consistent levels of demand for grade A office accommodation throughout all four quarters have left Manchester city centre with a record low supply.

There was significant office investment activity in Greater Manchester with activity totalling £491m in Q4 2017. This was an increase of £171m on the previous quarter and a huge £459m increase on Q4 2016.

You can download a PDF version of this here Office Pulse Manchester Q4 2017


In this issue:

Steady activity across Manchester in Q4

City centre office take-up for Q4 2017 reached 278,073 sq ft across 57 transactions, a 55% decrease on Q4 2016 - but Q4 2017 followed  exceptional activity levels in Q3.
The total take-up for 2017 was 1,208,184 sq ft across 271 transactions which is a slight decrease on 2016, but 13% above the 10 year average and in line with the 5 year average.

Notable transactions included, 13,610 sq ft to co-working company ‘Our Space’ at Fore Partnerships’ new re-development scheme Windmill Green. Manchester City Council took 20,034 sq ft at Bridgewater House. The biggest deal of the final quarter was AO taking 28,749 sq ft at Riverside. 

In the out of town markets, take-up in South Manchester reached 162,736 sq ft in Q4, bringing the 2017 total to 640,948 sq ft, a 17% increase on 2016’s performance. 
The combined Salford Quays and Old Trafford take-up figure for 2017 equated to 285,202 sq ft, which is a 21.7% decrease on 2016 which saw two large deals.
Warrington saw a 13.9% decrease on 2016 take up, with a total of 318,659 sq ft transacted, but is still in line with the 10 year average.



Significant demand for prime stock is the story of the year

Consistent levels of demand for grade A office accommodation throughout all four quarters have left Manchester city centre with a record low supply.

Only 160,000 sq ft of prime office space is readily available with those under construction not completing until 2019.

2018 will therefore be the year of the grade A refurbishment, with landlords presented with opportunities to deliver refurbished products to the market throughout the year and capitalise on the rental growth in this sector.

Key occupational transactions, Q4 2017


Property 

Size (sq ft) 

Landlord(s)/ vendor

Tenant

Riverside  28,749 Bruntwood AO
Bridgewater House 20,034 APAM Manchester City Council
Arkwright House 15,045 Catalyst Capital Push Dr
3 Hardman Street 14,086 Mapletree JMW
Windmill Green 13,610 FORE Partnership Our Space


Source: Lambert Smith Hampton 

Upward pressures on prime secondary rents

The highest rent achieved within the city centre this quarter was at 3 Hardman Street in Spinningfields at £33.50 over 14,086 sq ft.

Due to the limited supply of grade A space, incentive packages generally remain low with a 9-12 month rent free package being offered for a five-year term certain.

A total of 14 transactions were achieved at the £30.00+psf rental bracket in 2017. This number is due to increase in 2018 as we see prime secondary rents increase due to the lack of new build grade A supply.

Consistent with 2017, prime headline rents are likely to remain steady, with only a slight increase on £34.00psf in 2018.



Investment activity Q4

Greater Manchester office investment activity totalled £491m in Q4 2017. This was an increase of £171m on the previous quarter and a £459m increase on Q4 2016. Total office investment in Manchester city centre was £457m across 11 transactions. 

The total was bolstered by Manchester’s largest ever single-asset office deal – No1 Spinningfields, which was bought by Schroder REIM for £200m. 

Other key deals included 3 Hardman Square and 1 New York Street which were purchased by Royal London for £107m and £55m respectively. 

These figures demonstrate the continued investor appetite for office assets in Greater Manchester where there is a strong occupier market.

Key investment transactions, Q4 2017


Property 

Value (£m) 

Investor

Vendor

No. 1 Spinningfields 200 Schroders Allied London
3 Hardman Square 107 Royal London M&G
1 New York Street 55 Royal London Invesco
The Meridian 25 Fidelity Triuva


Source: Lambert Smith Hampton 

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