Greater Manchester’s investment market ended 2013 on a high with the year’s largest transaction in terms of size, the acquisition of the 433,637 sq ft Exchange Quay office complex in Salford Quays by a North American Institution.
According to MIDAS, Manchester’s inward investment agency, this deal ‘plays a sizeable role in fuelling business confidence in and around the region’, a sentiment echoed by property firm Matthews & Goodman who state that this paints a positive picture for the year ahead and highlights a growing trend of investors seeking opportunities in the North West.
Dominic Evans, Partner in the Manchester office of commercial property consultants Matthews & Goodman, said; “The Exchange Quay acquisition highlights a growing trend of investors recognising the opportunity presented by the North West and specifically the Manchester economy. The wave of capital from both indigenous and foreign sources has fuelled significant capital growth in London and this is starting to spread to the regions as investors seek higher yielding opportunities within the context of managed risk. The strong fundamental attributes of the Manchester property market compared to many other locations throughout the UK ensure Manchester is very well placed to receive renewed interest from investors looking for opportunity away from the heat of London and the South East. Manchester is increasingly recognised on an international scale and as such is an easier landing ground for foreign wealth compared to less well known towns and cities.”
Hunter Property Fund Management (HPFM), who acquired Exchange Quay on behalf of the overseas investor, has stated that its brief had been to ‘Source a UK project with immediate asset management opportunities’ and Mr Evans thinks this trend is set to continue. He says; “What is interesting is the resurgence of interest in more active management opportunities from institutional investors, across all commercial property sectors where value can be created through active management and repositioning. Exchange Quay is a perfect example of this. The market has been through the pain of falling capital values, increasing voids and diminishing take up. Values have necessarily fallen. As the economy improves confidence in investment of this scale grows. The difficulty of securing competitive finance has changed the type of investor that has been active with a notable reduction in the activity of leveraged buyers. However well-funded investors are in a very strong position to capitalise on the current market conditions.”
Tim Newns, chief executive of MIDAS, Manchester’s inward investment agency thinks that HPFM’s overseas investor won’t be the only one seeing the potential of Salford Quays. He comments; “Since the development of MediaCityUK and subsequent occupation by the BBC, ITV, Salford University and over 80 SMEs and start-ups, Salford Quays has experienced something of a renaissance.
“Exchange Quay in particular continues to be a landmark development in the area and the acquisition of this site and plans to spend £10 million on a comprehensive refurbishment, is very welcome news. It represents a large amount of flexible space that provides Manchester with an excellent opportunity for new occupiers, particularly in sectors such as business services. Of course, deals like this also play a sizable role in fuelling business confidence in and around the region, and in many ways this is invaluable for us as the inward investment agency for the city region.
Mr Newns thinks the area is well placed to attract occupiers too; “Looking ahead at some of our key pipeline projects we know that around half of our leads relate to financial and professional services and manufacturing; however, given the proximity to MediaCityUK, Exchange Quay offers a fantastic proposition for business and shared service operations that support not just these sectors, but also the burgeoning creative and digital sector.”
Looking to the office market for the year ahead, Mr Evans concludes that; “The limited supply of new Grade A office development in core locations combined with an improving economic outlook, which in turn fuels occupier confidence, should lead to more sustained levels of annual take up, potentially driving rental growth. Areas like Salford Quays in close proximity to the city centre with excellent transport links, cheaper occupational costs, bigger floor plates and lower capital values will continue to appeal to occupiers and therefore investors.
“Furthermore the position is moving back in the landlord’s favour with a reduction in the incentive packages tenants are able to demand. The influx of capital both from international and UK based investors, particularly for assets with strong fundamental attributes should drive a positive yield shift. There continues to be an air of nervous optimism about commercial property in the regions. For those brave enough to explore the opportunity the rewards can be very healthy but as with everything it is about picking and choosing the right assets.”