Market snapshot

Office Market Pulse Manchester Q2 2018

A number of ‘big ticket’ deals have provided a strong Q2 performance which in turn has driven an impressive first half of the year in all Manchester markets both within the city centre and out of town.

You can download a PDF version of this here Office Pulse Manchester Q2 2018


In this issue:

Strong Q2 figures drive very positive results for the first half of 2018

  • 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, Q2 2018


Property 

Size (sq ft) 

Landlord(s)/ vendor

Tenant

No.8 First Street 53,839 GMPVF WSP
101 Barbirolli 39,934 AEW Handelsbanken
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 pressures 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.

Investment activity Q2

  • 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, Q2 2018


Property 

Value (£m) 

Investor

Vendor

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 

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Josh Levy

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