Take-up of prime office space in Manchester reached its highest for seven years in the final quarter of 2016, according to the latest research by real estate advisors Colliers International.
Some 621,016 sq ft of office space was let to occupiers in 83 market deals in the period from October to December 2016 – the largest amount of space taken since 2010.
When added to the amount of office space let in the first three quarters of the year, take-up for 2016 totalled 1,306,599 sq ft, a figure on a par with the totals for 2014 and 2015 which also exceeded 1.3m sq ft and a vote of confidence in the Manchester office market, despite predictions of economic uncertainty following the Referendum vote in June for the UK to leave the European Union.
More than half of all office space let in the city in 2016 was suites of more than 10,000sq ft with the average deal size being 5,045sq ft, some 18 per cent higher than in 2015.
Peter Gallagher, director, national offices at the Manchester office of Colliers International, said: “Overall, the city centre office market has shown a remarkable resilience following the EU referendum, with 2016 take up exceeding that of other regional UK cities.”
The latest snapshot by Colliers showed the Manchester office market proved attractive to occupiers from a wide range of sectors with law firms and media and technology players leading demand with 17 per and 16 per cent of take up.
Mr Gallagher added: “With Virgin Media and Vodafone in the market with ‘live’ office requirements, Manchester’s media and tech sector is set to dominate the wider Manchester market over the coming year, helping to create a diverse and vibrant economy and cementing Manchester’s claim to be one of the leading regional tech hubs.”
Major office deals secured during 2016 included:
Covea/Swinton Insurance agreeing to take the entirety of 101 Embankment, the 165,000 sq ft Grade A office scheme in Salford being delivered by Ask Real Estate in a joint venture with Carillion and Tristan Capital Partners;
Co-op Digital completing its occupation of Federation House NOMA by taking a further 45,446sq ft;
Manchester Metropolitan University (MMU) acquiring 63,661sq ft at 6 Marlborough Street;
deals for more than 50,000sq ft of Grade A office space at No 1 Spinningfields and XYZ Building;
international law firm Freshfields Bruckhaus Deringer agreeing with English Cities Fund to move its global centre into 80,848 sq ft of One New Bailey, Salford.
Mr Gallagher reiterated Colliers’ previously stated concern that the “acute shortage” of immediately available Grade A office space in central Manchester would result in an “unprecedented complete absence” of ‘ready to occupy’ space by mid 2017, lasting until the end of 2017.
Manchester city centre currently has about 150,000sq ft of existing Grade A office space supply with the two largest single floor plate suites available for immediate occupation being 41,000sq ft at 1 St Peter’s Square and 22,985sq ft over two floors at 40 Spring Gardens.
“While the number of projected schemes in Manchester represents the largest pipeline of stock in the city since the recession, over half of schemes due to complete in 2017 have already been pre-let,” he added.
Schemes due to complete by the end of the year include 2 St Peter’s Square (120,000sq ft), No 1 Spinningfields (116,000sq ft) and 8 First Street (106,000sq ft).
In the absence of new available office space, rents across the city continued to rise in 2016 with headline rents for Grade A suites increasing by some three per cent to 35 per sq ft. This shortage of supply combined with ongoing occupier demand will place further upward pressure on office rents with the best quality accommodation expected to hit £40 per sq ft by 2020, according to Colliers’ report.
Mr Gallagher said the investment market remained strong in 2016 with £565m of transactions compared to £611m in 2015 and would continue to be driven by overseas investors seeking value provided by the weak pound.