Manchester office leasing to return to normal next year – Savills
Savills expects full-year take-up of office space in Manchester to exceed last year’s total of 699,000 sq ft. It says South Manchester has experienced something of a recovery, with year-to-date figures exceeding take-up for the city centre.
The firm’s latest data on the market for Manchester offices indicates that the third quarter was another steady but below-average quarter, with city-centre offices take-up at 154,749 sq ft, a slight improvement on the total for Q2 2012. The total so far this year is 483,539 sq ft.
Grade A leasing activity has been very low so far this year, Savills notes, accounting for only an estimated 13% of the space leased in 2012. This is the second-lowest figure for the past 12 years, the firm notes, and reflects a low level of business confidence locally and nationally, and also the particularly subdued activity levels within the banking and finance sector – which has traditionally paid the highest rents. However, Savills expects a “dramatic improvement” in the final quarter of 2012.
There are still a number of large tenant requirements that are yet to be satisfied in Manchester, Savills notes. One of these – the mysterious “Project Tomorrow” – is a very large acquisition by a TMT business (180,000 sq ft in 20 buildings) and is also “a test of concept that could be rolled out to other cities in the future,” the firm points out. “This is a strong vote of confidence in Manchester’s continued attraction as a credible location for inward investment in the UK.”
Given the credibility of Manchester as a destination for domestic and international investment, and expectations of a gentle pick-up in local tenant confidence and demand, Savills forecasts that leasing activity will return to normal levels in 2013 and beyond. It expects Grade A availability to continue to decline and says the lack of newly built Grade A office space in the core will put more upward pressure on prime office rents in Manchester city centre, which it forecasts will rise by 3%-5% in 2013 and 2014.
