Manchester office news 20th August 2014

Manchester is leading the recovery in the UK’s regional markets, with “take-up and investment activity running far ahead of the rest”, reports Knight Frank.

The 10 leading regional cities saw combined take-up of 1.41m sq ft in Q2, marginally below Q1’s total but 15% above the five-year quarterly average. KF writes: “Much like Q1, Manchester was the clear stand-out performer in Q2. Following 315,000 sq ft of take-up in Q1, the city centre saw an impressive 484,000 sq ft of activity in Q2.

This was its best quarter since 2007 and three times the level of the next strongest performers, Edinburgh and Bristol, which themselves saw robust activity in Q2.” KF added that Manchester was home to the largest deal of the 10 cities in Q2, with Slater & Gordon leasing 104,000 sq ft at 58 Mosely Street. Q2’s second largest deal was seen in Cardiff - Southern Electric purchased Peterson House, Cardiff Gate Business Park, for its own occupation, totalling 46,581 sq ft. KF writes: “Grade A availability continues to ebb away in the absence of significant development completions, falling 14% year-on-year collectively. However, the most remarkable feature of Q2 has been the increase in speculative development activity, which rose 50% in Q2 to stand at 2.1m. Aberdeen, Cardiff, Edinburgh Leeds and Sheffield all saw new schemes commence in Q2.

“Following prime headline rental increases in Aberdeen, Bristol, Manchester in Q1, Edinburgh was the one regional market to see growth in Q2 – rising from £27 to £28 per sq ft.“ In the investment market, KF said just over £1bn of regional office assets changed hands in Q2 2014, taking total volumes for H1 2014 to 1.8bn, its strongest half year total since H2 2007. Manchester was home to one third of all the recorded deals across the 10 regional centres and 67% of investment volume. Its strong performance was underpinned by the sale of two major trophy assets - M&G’s purchase of Spinningfields (£320m) and Schroder UK Property Fund’s purchase of City Tower (£132m). David Porter, partner, agency said: “Manchester city centre has just had its best quarter of take-up for seven years, underlining the revival in occupier confidence to relocate and expand headcount. In response, we expect developers and investors to show increasing appetite to deliver new-build space in Manchester and indeed elsewhere in the regions, where Grade A supply is under pressure”.
Henrie Westlake, partner, investments, said: “Manchester’s outstanding level of investment activity in Q2 is a clear demonstration of the level of appetite there is when good quality stock comes to the market. Activity is being largely dictated by the level of buying opportunity. With limited willingness to sell, prices are expected to harden further during the remainder of 2014, after which we expect performance to be driven more by generating income growth.”