For the first year on record, the TMT sector made up the largest share of take-up across the eight Northern Powerhouse office markets of Leeds, Liverpool, Manchester city centre, Newcastle, Salford Quays, Sheffield, South Manchester and Warrington, accounting for 21% of total activity.
Employment in TMT-related jobs across the Northern Powerhouse has increased by 23% over the last five years since 2013 and is testimony of the rapid growth of the sector and the transformation of the UK’s major Northern economies over the past decade.
Activity from TMT occupiers has been entirely driven by expansion, accounting for 100% of deals above 5,000 sq ft, with key deals including Booking.com’s 225,000 sq ft pre-let at Manchester Goods Yard in Enterprise City, Perform Group’s 39,422 sq ft letting at Optim, White Rose Office Park in Leeds, and Gamma’s 27,939 sq ft letting at The Malt House in Salford Quays.
LSH believes this trend is likely to continue, with the number of jobs forecast to increase by a further 4,200 from 2018 to 2023 underpinned by several other sizeable deals expected to land before the year-end include Hewlett Packard (80,000+ sq ft) and Amazon (90,000 sq ft) in Manchester city centre, and the continued expansion of The Hut Group which has leased 16,040 sq ft at the Orange Tower, MediaCity, Salford.
The Channel 4 effect
Channel 4’s announcement that its new headquarters will be in Leeds is also likely to stimulate further employment growth across the region, as witnessed by the BBC’s relocation to Salford Quays in 2014. Salford is now home to the region’s strongest concentration of TMT sector jobs, standing 59% above the national average.
Meanwhile, Newcastle has seen the fastest job growth within the sector, increasing 59% over the last five years.
At 25,808, Leeds boasts the highest number of TMT sector jobs outside London and is forecast to increase by 7.2% over the next five years – the strongest increase of the markets.
Strong take-up across the board
The research also shows that, across all sectors combined, 2018 is set to be a record year for the Northern Powerhouse office markets, with 5.8m sq ft of space anticipated to have been let or sold by the end of the year. This is 13% above the 2015 peak and 37% above the 10-year average.
This healthy occupier demand has driven a fourth successive year of falling office supply, with every location apart from Manchester city centre now having less than one year’s supply of grade A space.
While development activity in Manchester city centre is booming - accounting for 70% of total space under construction in the Northern Powerhouse region –few schemes are nearing delivery elsewhere, prompting LSH to issue a “significant health warning” on growth prospects.
Oliver du Sautoy, Head of Research at LSH, said: “Despite the uncertainty posed by Brexit, there is a real sense that the major cities of the Northern Powerhouse are firing on all cylinders.
“The steady evolution of the region’s economies is clearly manifesting itself in market activity. The region’s stalwarts of professional services and public sector occupiers have been joined by a new breed of occupiers, namely in technology, media and telecommunications, which now account for the largest share of take-up.”
Adam Varley, Director of Office Advisory at LSH Leeds, added: “Occupiers in the TMT sector are increasingly looking for more flexible office accommodation which is capable of supporting rapid changes in their business structures. While not exclusively, we’ve also seen many of the businesses in the sector clustered around other like-minded organisations, which is reflected in the location, size and type of space leased.
“Landlords who are designing buildings which accommodate this growing sector of the market have seen the best results but region-wide examples are still fairly limited. We need to ensure that Landlords and developers maintain this focus to support the continued growth of the TMT sector as we head into 2019 and beyond.”