Strong Q2 figures drive positive results
- City centre office take-up for Q2 2018 reached 327,035 sq ft across 74 transactions, a 15.7% increase on the same quarter in 2017. This brings the total for H1 2018 to 769,118 sq ft, an impressive 56% greater than in H1 2017.
- The uplift was largely due to a number of ‘big ticket’ requirements finally being satisfied in Q2. These included: WSP taking 53,839 sq ft at No.8 First Street, Handelsbanken’s move to 101 Barbirolli (39,934 sq ft) and On the Beach taking 34,507 sq ft at Aeroworks.
- In the out of town markets, take-up was high in both Salford Quays and Trafford with a combined take-up of 52,394 sq ft for Q2, bringing the 2018 H1 total to 121,475 sq ft which is a 30% increase on the same period in 2017. The largest deal in Q2 was at Centenary House in Salford with Regus taking 22,123 sq ft.
- South Manchester also enjoyed a fruitful quarter, with 216,403 sq ft transacting and bringing the 2018 H1 total to 385,265 sq ft, a 16% increase on the same period in 2017. The largest deal was the sale of Lakeside 3400 at Cheadle Royal Business Park to Pure Offices.
- Warrington saw a Q2 total of 126,635 sq ft bringing the H1 total to 197,315 sq ft in line with same period in 2017.
Significant demand for prime office continues
- The occupier appetite for both new build and refurbished grade A product has not slowed down with 104,193 sq ft being taken up across three transactions.
- With grade A new build supply continuing to dwindle, limited new development being delivered, and a number of refurb schemes going live this year it is inevitable that demand for grade A refurbished product will remain high.
key occupational transactions
|Property||Size (sq ft)||Landlord(s)/Vendor||Tenant|
|No. 8 First Street||53,839||GMPVF||WSP|
|Lakeside 3400||36,400||Target||Pure Office (purchaser)|
|Aeroworks||34,507||Epislon||On The Beach|
|Centenary House||22,123||Union Property Services||Regus|
Source: Lambert Smith Hampton
Upward pressure on prime secondary rents
- The highest rent achieved within the city centre this quarter was at 80 Mosley Street at £32.50 per sq ft, albeit a relatively small deal of 2,100 sq ft.
- At the grade A refurbished schemes, 101 Barbirolli and No.8 First Street, £30.00 per sq ft and £29.00 per sq ft was achieved.
- Headline rents and secondary refurbished rents are expected to rise throughout the year as the new build grade A supply decreases and new refurbished product goes onto the market.
- The highest out of town rent was again seen at the Orange Tower at MediaCityUK at £24.50.
- Due to the limited supply of grade A space, incentive packages remain low with an average package of 9-12 months rent free being offered for a five-year term certain.
- Greater Manchester office investment activity totalled £109m in Q2 2018 and accounted for 50% of the North West investment volume.
- The total, spread over 12 transactions, was exactly half of the Q1 total but up £28.5m year-on-year.
- Total office investment in the Manchester city centre sub-market was £86.5m across six transactions, accounting for 79% of the total volume.
- Key deals in the city centre included: Bet365’s purchase of the Zenith Building for £31.5m at 5.25%, and Queens House which was purchased by Portsmouth City Council for £8.89m at 4.75%.
- Key deals in the South Manchester sub market included Cervidae’s purchase of One Didsbury Point for £11m and the £20.5m purchase of Manchester Green by Squarestone.
- These figures demonstrate the continued investor demand for office assets in Greater Manchester, due to its strong occupier market.
key investment transactions
|Zenith Building, Manchester||31.5||Bet365 Group||AM Alpha|
|Manchester Green, Manchester Airport||20.5||Squarestone||Barwood Capital|
|26 Cross Street||11.5||Private Investor||Catalyst Capital|
|One Didsbury Point, Didsbury||11||Carvidae||Titanium Real Estate|
Source: Lambert Smith Hampton