2015 Office Market Update

The election results are in and with the Conservative Government in full control, business and job generation is at the top of the agenda. The ‘Northern Powerhouse’ will focus on the strengths of Manchester and with take up in 2014 reaching almost record levels; we’ll explore in this latest blog whether the positive sentiment and levels of demand have continued in to 2015.

Q1 2015 take up equated to 328,914 sq ft which is slightly ahead of the 313,874 sq ft recorded during the same period in 2014. This figure was boosted by some significant transactions with well-known names that the market had anticipated were due to make imminent moves. It also showed a return to the pre-let market for the first time since the early/mid 2000’s.

Of the 70 transactions recorded during the first 3 months of the year, 7 of these were in Grade A new build accommodation that equated to 137,427 sq ft or 42% of total space transacted.

Two pre-lets were also agreed with PwC at No 1 Spinningfields committing to 49,406 sq ft and EY taking 41,628 sq ft in Two St Peter’s Square. These developments will be delivered in early/mid 2017.

The other Grade A deals that took place included; rentalcars.com at 35 Fountain Street (37,845 sq ft), Trowers & Hamlins at 55 Princess Street (17,271 sq ft) and Peninsula Business Services and British Transport Police who both took 11,750 sq ft at The Peninsula.

2014 saw an increase in deals over 10,000 sq ft with these lettings accounting for 48% of total take up. This trend of larger deals has continued in to 2015 with seven 10,000 sq ft + transactions taking place during Q1 2015 comprising 180,891 sq ft of take up or 55% of total space let.

Inward investment was a defining feature of the 2014 commercial office market and with the recent announcement that Freshfields were committed to opening a global service centre and would grow the Manchester team up to circa 700 staff means Manchester’s strength on the inward investment scene looks set to be further cemented.

Freshfields will initially take short terms space of 40,000 sq ft in Arndale Tower ahead of a larger more permanent move in 2017. By this point a number of speculative schemes will have been delivered in addition to those already mentioned. These include; the newly launched XYZ Building, Spinningfields (148,000 sq ft), 1 New Bailey, Salford (125,000 sq ft) and 101 The Embankment (170,000 sq ft) which will be delivered in mid-2016 to early-2017.

The central core continues to stand out as the most popular area for occupiers with 20 transactions comprising 141,274 sq ft of take up or 43% of total space let. This area of Manchester, which has traditionally commanded some of the highest rents in the city, has illustrated that occupiers are increasingly willing to pay more for the better quality buildings within the city centre.

During 2014 concession packages reduced significantly from the 30% discount rates to 15% to 20%, 9 to 12 months over a 5 year lease or 18 to 24 months rent free over a 10 year lease. In some circumstances discount rates of sub 15% are being agreed for sought after space. With the economy continuing to strengthen and businesses steadily expanding we expect 2015 to continue to have a strong year.