Manchester offices to outperform in 2013 – CBRE
Of the eight main regional UK office markets covered by CBRE, Manchester is expected to be the only one to record prime office rental growth this year – forecast at 2.5%. Since the economic downturn, the market for Manchester office space has outperformed the rest, and it looks set to continue to do so, CBRE says, thanks to its more positive employment outlook.
Employment levels in Manchester are supported by growth in a number of industries, including information and communication, real estate, administrative and support services, and professional, scientific and technical activities. CBRE’s annual average rental growth forecast for Manchester during 2012-2017 is 1.8%.
CBRE forecasts that the Leeds offices market, with marginal rental growth last year, will gain momentum in the later years of its forecast period thanks to a lack of major developments in the pipeline, reaching 2.0% in 2015 and 2016 and 2.9% in 2017 to produce forecast average annual growth of 1.8%, even though employment growth is not expected to be as strong as in Manchester.
The forecast for offices in Liverpool is more subdued, with CBRE not expecting employment to keep up with the pace it foresees for other cities. The firm projects no growth until 2014, when it forecasts rental growth of 1.3%, with annual growth in the other years in the forecast period estimated at 1.2% to give an average annual growth estimate of 1.0% over 2012-2017.
New office space in Birmingham coming onto the market this year is expected to lead to flat rents in 2014, after marginal growth in 2013, CBRE says. The firm expects demand for available office space later in the forecast period to be driven by the expanding workforce in the administrative and support services, and professional, scientific and technical sectors. Its rental growth forecasts reach 2.6% for 2016 and 2.5% for 2017, giving an average annual growth estimate of 1.5% over the forecast period.
Rents for offices in Bristol could slip this year, but a lack of new supply combined with a “robust” employment outlook suggest rental growth in 2014-2016 that could outperform all the other markets, at a forecast 2.8% for 2014, 3.6% for 2015 and 3.4% for 2016. The outlook is similar for Southampton offices – rents are not expected to fall here in 2013, but again there is no new supply in the pipeline and employment growth is forecast to gain momentum during the forecast period, leading CBRE to forecast 2.8% rental growth in 2014, 2.7% in 2015 and 2.6% in 2016. Bristol and Southampton have the highest annual average rental growth projection of the eight markets over the 2012-2017 forecast period, at 2.1%.
In Edinburgh, the Atria development, which is currently being marketed, is expected to help rents to increase 1.9% in 2013, whereas in Glasgow – where there is no such new scheme – rents are forecast to remain unchanged. Gradual rental growth is forecast for offices in Edinburgh and office space in Glasgow from 2014 onwards, and the slightly stronger employment growth projections for Glasgow could see it slightly outpacing rental growth in Edinburgh. CBRE forecasts Edinburgh office rental growth of an annual 0.9% for 2014-2016, rising to 1.8% in 2017, while for Glasgow it expects 0.9% growth in 2014 and 1.8% each year after that to 2017. Both cities are expected to produce annual average growth over the whole forecast period of 1.3%.
