Gentle recovery in demand ahead for Manchester offices – Savills
The market for Manchester office space to let has begun the year quietly, and the city will not be immune to the effects of local and national government austerity, but its strength in sectors other than finance and the public sector will deliver steady employment growth, Savills says. “The city’s strength in media, new media, education and biotech are all factors that will insulate it against the drag of public-sector austerity,” it adds. Larger active requirements currently include companies such as Bupa, Jacobs Engineering and Aviva, it notes.
Savills says only a third of the currently vacant office space in Manchester is Grade A, and it expects this proportion to fall as a result of a lack of new developments and a steady recovery in take-up. It feels that supply in Manchester has now peaked, with the estimated vacancy rate overall falling from 12% at the end of 2011 to 11.7% at the end of Q1 2012. The firm thinks that the shortage of large Grade A space may divert demand to the fringe, which could benefit Salford and South Manchester in the longer term.
Take-up of Manchester offices in 2011 was 673,570 sq ft, which was 23% below the long-term average. Only 22% of the office space let last year was Grade A. The year finished strongly with a fourth-quarter take-up of 246,000 sq ft but the first quarter of 2012 failed to continue this comparative strength, with only 176,000 sq ft leased.
Savills expects the offices market in Manchester to see a “gentle recovery” in demand to average annual take-up levels from this year onwards. It says the real undersupply is in smaller units, where headline rents are beginning to recover, but adds that smaller unit demand will continue to be satisfied by existing stock – albeit with a dwindling supply of Grade A space. Larger requirements will be forced into the pre-let market and this could stimulate some speculative development, Savills says.
