Market snapshot

Office Market Pulse Manchester Q4 2012

Findings from our latest Manchester Office Market Pulse show a strong performance from the City Centre and South Manchester markets in Q4 2012, reaffirming Greater Manchester’s position as the most active region outside of London.

To download a Print Ready PDF of the Manchester Office Market Pulse, please click here.

In this issue:

Record breaking year for Manchester City Centre and South Manchester

Total take-up for 2012 in Manchester City Centre reached 758,615 sq ft; an increase of 8% from the 701,390 sq ft achieved in 2011. A total of 275,000 sq ft was transacted across 85 deals during Q4; a 60% increase from the previous quarter (Q3 2012: 172,000 sq ft). Although less than the five-year average (930,000 sq ft) and in the absence of any large transactions (in excess of 30,000 sq ft), Manchester City Centre achieved its highest number of transactions on record.

Despite recording a drop in take-up of 23% from the previous quarter to 202,630 sq ft in Q4 (Q3 2012: 264,048 sq ft), the out of town markets - predominantly South Manchester - also enjoyed a successful year. With total annual take-up of 646,780 sq ft - a 32% increase from 2011 - the region witnessed its strongest performance since 2006.

In contrast, Salford Quays had a disappointing year with total take-up of 67,830 sq ft; a reduction of 28% from the 93,809 sq ft transacted in 2011 and 37% less than the five-year average of 107,420 sq ft.  The transaction to Vital Services Group (19,499 sq ft) at the Soapworks in the final quarter was the most significant deal of 2012.       

For a detailed breakdown of take-up by grade, please click here or on Chart 1 to the left of this article.

Significant occupational transactions in Q4 2012

Property   Size Landlord(s)  Tenant / Purchaser 
Abbey & Prudential, Stockport 21,934 sq ft Private investor Owner occupier

The Boiler House, Soapworks,
Salford Quays

19,499 sq ft Carlyle Group Vital Services Group
Chancery Place, City Centre 19,370 sq ft Chancery Place Ltd HSB
Riverside, City Centre 17,699 sq ft Bruntwood Air Energi
City Lab, Princess Parkway 17,500 sq ft Bruntwood Icon

Source: Lambert Smith Hampton

Grade A shortage triggers knock on effect

The lack of speculative development across the region has led to a continued reduction of Grade A accommodation. Approximately 510,000 sq ft is available in the City Centre; a fall of 15% from the previous quarter (Q3 2012: 597,000 sq ft). The shortage of Grade A accommodation has also impacted on Grade B+ accommodation, with supply totalling 446,000 sq ft; a reduction of 12% from the previous quarter (Q3 2012: 504,000 sq ft).

Approximately 275,000 sq ft of Grade A accommodation is available across South Manchester; a reduction of 8% from the previous quarter (Q3 2012: 329,000 sq ft).  The Grade B+ accommodation has also fallen by 7% from the previous quarter, totalling 518,000 sq ft (Q3 2012: 558,000 sq ft).

Argent’s One St Peter’s Square in the City Centre, which is due for completion in 2014, is the only development activity within the region currently underway.

For a breakdown of supply by grade, please click here or on Chart 2 to the left of this article.

Headline rents to rise as Grade A availability continues to shrink

Headline Rents for Grade A accommodation are now firmly established at £30.00 per sq ft within Manchester City Centre, and £19.00 per sq ft for out of town business park accommodation. 

The lack of Grade A stock has benefitted those buildings that have undergone substantial investment (Grade B+) and enabled Headline Rents to be maintained with reduced incentives.

The lack of Grade A accommodation throughout the region is likely to increase average rents and reduce incentive packages for Grade A and Grade B+ accommodation throughout 2013. 

For a breakdown of rental figures, please click here or on Chart 3 to the left of this article.

Increased investment volume fails to continue into final quarter

Following the welcome investment activity in Q3 2012, this positive trend failed to continue into the final quarter, with the total volume of office transactions down by more than 80% at £6.2m (Q3 2012: £32m). 

The most significant deal to take place was the purchase of 67-75 Mosley Street in Manchester City Centre by a private syndicate for £4m. The deal reflected a net initial yield of 9%.

To view our latest UK Investment Transactions (UKIT) report, please click here.

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