Manchester and its surrounding areas continue to be viewed as the second city after London and the commercial property market reflects this. Construction does appear to be slowing – with fewer developments due to complete than occurred in 2011/2012 – and most major projects seem to be driven by the public sector and the various university expansion programmes.
However, on a positive note, commercial office leases and – in particular – Grade A office space continues to be attractive with rents reaching around £30 per square foot. With no new Grade A space expected in 2013, rents should – in theory – again remain high and may even rise slightly. Although headline rents at the top end remain buoyant, there are still some extremely attractive incentives available to potential tenants such as long rent free periods, contributions to fit out costs and attractive break options.
Unfortunately, the “second tier” office rental market it not so buoyant with the take up of new leases being much slower and many refurbished properties are remaining on the market for some considerable time. As with Grade A spaces, there are some great incentives available and these are mainly due to landlords finding it difficult to complete deals as tenants have a wide choice and so are considering their options right up to the last moment of signing.
In terms of new tenants, the main growth sectors are coming from several key business sectors including; professional services, banking and finance. Several high profile London firms have opened offices in Manchester over the last 24 months and this trend will hopefully continue. The creative and digital industries should also help achieve some growth in the commercial property sector particularly in areas such as the Northern Quarter, Ancoats and of course Media City.
Finance still appears to be the main barrier to new construction projects as well as to further investment in both the city and wider region’s commercial property stock. Funding needs to be made available at competitive rates with funders having more realistic expectations around the additional security being offered by developers. I also believe that overseas investment will be more important than ever in 2013 and beyond with key markets such as China, Brazil and India needing to be further explored; this is particularly in relation to the creative and digital sectors. Hotel construction seems to be one area where there is further potential growth for 2013 too.