Investment in the central Manchester office market hit an all-year high in the third quarter of 2019, according to the latest sector research by real estate advisors Colliers International.
The firm’s analysis showed investment volumes in the city centre reached £35.75m during July, August and September, representing the highest level for the year to date.
Key office investments in the third quarter included Topland Group plc purchasing 58 Spring Gardens for £19.1m with a yield of 6.3 per cent and 151 Deansgate for a sum of £10.5m with a yield of 5.5 per cent.
Colliers’ research stated however that investment volumes for the year to date remained subdued at a total of £63m overall, the lowest level since 2009.
Peter Gallagher, director, national offices and head of the Manchester office of Colliers International, said: “Investor demand in Manchester for prime let stock remains buoyant and diverse.
“Manchester’s global appeal and sustained rental and capital performance has made the city the preferred UK regional destination for international investors and UK funds alike seeking to invest outside of London.
“As a result of continued occupational and investor demand and sustained rental growth, prime yields will move in further (from an average of 4.75 per cent) and capital values will increase through rental growth.”
The third quarter of 2019 saw 295,379 sq ft of office space leased in 71 deals, including 56 deals for transaction of below 5,000 sq ft, totalling 110,332 sq ft and two major deals above 25,000 sq ft, totalling 61,835 sq ft.
These third quarter transactions contributed to a total of more than 1.1m sq ft being leased in the first nine months of the year, some 10 per cent above the Q1 to Q3 quarterly average and should the trend continue, pointing to 1.5m sq ft of space being taken in 2019 as a whole.
Take-up of office space in Q3 was dominated by occupiers in media, technology and business services, responsible for 30 deals to lease 146,228 sq ft or 50 per cent of total take-up.
Leasing of Grade A office space represented 393,856 sq ft or 35 per cent of the total year-to-date take-up, with the largest Grade A deal in the third quarter being the leasing of 13,896 sq ft by JLL at Landmark, St Peter’s Square.
Colliers’ unique analysis of Grade A net stock absorption (NSA) – a measure of the change in physically occupied space during a given period – showed levels remained positive but low in Q3, with Grade A net absorption at 66,371 sq ft. Some 92 per cent of all grade office space and 98 per cent of Grade A office space in central Manchester was occupied, with very little Grade A space coming on to the market.
Strong leasing activity continues to deplete Grade A office availability, leaving just 129,831 sq ft of ‘ready to occupy’ Grade A office space in five buildings across the city centre – the largest available spaces being 70,542 sq ft at 101 Embankment, 26,285 sq ft at No 8 First Street and 22,047 sq ft at 3 Hardman Square, Spinningfields.
Peter said 1.2m sq ft of new Grade A office supply was under construction across nine buildings in the central business district and edge of city/campus locations, including five schemes that will provide 732,375 sq ft over the next year such as Landmark, 125 Deansgate, Two New Bailey Square, Salford, 2 Circle Square and Riverside House, New Bailey, Salford.
He added: “A future pipeline for delivery beyond 2021 is beginning to emerge with a small number of schemes at NOMA, New Bailey and First Street, Southern Gateway obtaining planning consent. However, they will not deliver before mid/late 2021 at the earliest.”