Manchester faces an historic complete absence of ready to occupy office space by the second quarter of 2016, according to real estate advisors Colliers International.
The firm’s latest Net Stock Absorption (NSA) research of the city’s office market attributes the unique and looming scenario to the combination of the continuing rate of Grade A office take-up from local, national and international firms and the expected completion of leasing deals under offer eating into ‘in-build’ stock.
Colliers International reports that Manchester office take-up in total equated to 1,318,282 sq ft in 2015 via 311 transactions – just short of the totals for 2014 and 37.5 per cent above the ten-year average – and including 24 transactions of more than 10,000 sq ft representing about 50 per cent of total take-up at 657,135 sq ft.
Take-up of Grade A space accounted for almost one third of all transactions – a doubling of the previous three years indicating that strong demand for central office accommodation outweighed the ability of the market to keep pace with demand.
The supply of Grade A space in central Manchester experienced a decline of 61 per cent since 2014 to take it to lowest level since 2006 – there is currently just 216,000 sq ft of Grade A stock available to let across the city including the most modern space at schemes such as 1 St Peter’s Square, 40 Spring Gardens, 3 Hardman Square and 3 Hardman Street.
To address this imbalance between demand and the availability of good quality stock, 2015 saw the commencement of new build office schemes such as One New Bailey, the XYZ Building at Spinningfields, 101 Embankment at Greengate, 2 St Peter’s Square and 1 Spinningfields – but these are not due for completion until late 2016 and through to 2018 and both XYZ and One New Bailey are reportedly already fully let.
The Manchester market currently has 1.39m sq ft of consented office schemes in eight buildings – of which 39,750 sq ft is already pre-let and a further 13,250 sq ft is under offer. This effectively leaves just 1.33m sq ft available including schemes due to start at Astley & Byrom House on Quay Street, 11 York Street, Landmark at St Peter’s Square and NOMA’s 2 & 3 Angel Square.
Peter Gallagher, director, national offices at the Manchester office of Colliers International, said: “Whenever I have been asked to comment on new Grade A office space at almost any time in the past 25 years I have been able to talk about the choice of available supply, and having that ‘ready to walk into’ stock to accommodate footloose in-movers has been central to the city’s offer and appeal.
“Today it’s a wholly different story – given the current level of Grade A office take-up and the expected completion of lease transactions presently under offer, the Manchester office market is likely to experience an unprecedented complete absence of ready to occupy supply of best quality Grade A space by the middle of 2016.
“Even though the amount of consented developments is sizeable, the lack of readiness and availability of funding for a speculative start on construction is likely to delay or disrupt the early delivery of a number of schemes to the market and even those ready to start will not add to supply until at least 2019.
“We further expect that the majority of Grade A stock currently in-build will also be let well before practical completion, leading to the growth of a well-established pre-let office market in Manchester. People are just going to have to get better at anticipating their space needs a lot earlier.”
He said the pre-let market was already being clearly signalled by the number of deals on space still in-build – professional services firm PwC securing 49,406 sq ft at 1 Spinningfields, EY signing for 41,628 sq ft with options on further space at 2 St Peter’s Square and cyber security and risk mitigation specialist NCC Group, law firm Shoosmiths and Global Radio all taking space for 2017 completion at the XYZ Building. The latest large grade A letting of space under construction has been reported at 1 Spinningfields, where law firm Squire Patton Boggs is reported to be in legals to take 27,500 sq ft.
Elsewhere, Salford enjoyed an “exceptional” take-up of office space in 2015 including the biggest commercial property letting in Greater Manchester of the past five years – the leasing of 142,000 sq ft by BUPA at Harbour City.
