Market snapshot

Office Market Pulse Manchester Q3 2012

Occupational activity across Greater Manchester has significantly increased (422,970 sq ft) in Q3 in comparison with the previous quarter (279,631 sq ft) due to several large South Manchester transactions. Total take-up for the year to date is 1,039,563 sq ft, which is higher than the 877,037 sq ft for the corresponding period in 2011.

In this issue:

Take-up remains prominent in the city centre

Take-up for Q3 in Manchester city centre (172,346 sq ft) has increased slightly from the previous quarter (128,408 sq ft). The total year to date (470,645 sq ft) is higher than the level achieved for the corresponding period in 2011 (448,868 sq ft), although both figures remain below the five year Q3 average of 694,645 sq ft.

The dominance of ‘churn transactions’ within the city centre has continued, with only two transactions in excess of 10,000 sq ft within the past quarter. This includes the largest transaction of the year; Futureworks at Bruntwood’s Riverside scheme.

Several large transactions within the South Manchester market have boosted total take-up for the out of town market, which is now outperforming the city centre. Total take-up for the year to date within South Manchester (527,890 sq ft) is 50% higher than the corresponding figure in 2011 (351,086 sq ft).

For a detailed breakdown of take-up figures, please click here.

Significant occupational transactions in Q3 2012

Property   Size Landlord (s)  Tenant / Purchaser 
Wilmslow Office Park 100,000 sq ft RBS Micromass Waters
Capita Building, Cheadle Royal 50,000 sq ft Pricewaterhouse Coopers Blemain Group
Aldine House, Riverside 24,000 sq ft Bruntwood Futureworks
3 Hardman Sq, Spinningfields 22,066 sq ft Credit Suisse I2
Park Square, Cheadle Heath 17,642 sq ft Orbit On The Beach

Continued erosion of city centre supply

The lack of existing grade A stock has again impacted on grade A take-up, which accounted for only 6% of total take-up within the city centre in Q3.

Along with Project Tomorrow, there are several longstanding large requirements within the region where the lack of stand alone grade A buildings will increase design and build activity.

Jacobs, BUPA and Costain are three major companies considering relocating in excess of 50,000 sq ft. In addition, Balfour Beattie (40,000 sq ft) is expected to announce an imminent decision on their preferred building.

For a breakdown of office supply, please click here.

Rental values remain stable

Headline rents in Manchester city centre for grade A floors of less than 10,000 sq ft remain stable, with prime grade A buildings achieving £30.00 sq ft.

Rents for grade A out of town accommodation remain at £18.00 - £19.00 per sq ft depending on the size of accommodation.

Inducements remain significant for most stock although the shortage of existing grade A accommodation is beginning to increase average rents.

For a breakdown of rental values, please click here.

Investment activity remains subdued

Total investment activity in the North West increased  during Q3 2012 compared to the previous quarter. Approximately 20% of which was in the office market.  However, compared to Q3 2011, investment activity was lower mainly due to a continued lack of stock.

Investor demand remains focussed on prime assets and in particular city centre offices which has had an adverse effect on out of town office values.  In our view, prime office yields in Manchester city centre currently stand at 6.25%. However, we are still experiencing a considerable yield divergence away from the prime end of the market as demonstrated by the sale of Churchgate and Lee House which was reported at £23m reflecting a net initial yield of circa 11%.

Highlights in Q3 include:

  • Legal & General’s acquisition of Ralli Quays in Manchester for circa £15m
  • Dunedin’s acquisition of Churchgate and Lee House for circa £23m
  • Orchard IM’s purchase of Joule House in Trafford Park for circa £7.6m

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