Posted 24 July, 2012 OBI BLOG
Manchester endured a sticky Q2 in terms of office take up, which totalled 128,408 sq ft across 50 transactions.
At the half way point in 2012, office take up comprises circa 300,000 sq ft which falls in line with OBI’s prediction for office take up for the year being somewhere in the region of 600,000 – 700,000 sq ft.
50% of the deals completed achieved rents between £10.00 – £15.00 psf, with only three lettings achieving £20.00 psf – OBI advised the landlord on each of these deals. No transactions were completed on new build stock and no deals achieved in excess of £20.00 psf. This is further evidence that that occupational market has become increasingly cost sensitive.
During Q2 there were only four transactions completed for suites in excess of 5,000 sq ft and the only transaction of a significant size was our acquisition of 21,500 sq ft at Riverside on behalf of MoneyPlus Group. MoneyPlus relocated from their longstanding South Manchester base and this confirms the attractiveness of central Manchester to organisations looking to undertake rapid expansion – the amenities and public transport infrastructure were significant factors in their decision. Bruntwood have completely transformed the Riverside complex and the capital invested is paying off, with positive take up even before the work has been completed.
Again the Portland Street Corridor proved a popular part of the city in securing 15 transactions (a total of 43 deals for the year to date). 28,000 sq ft were let in this area at an average headline rent of £14.22 per sq ft. Bruntwood’s St James’ building on Oxford Road enjoyed a strong run leasing 13,500 sq ft in six transactions – all achieving £14.50 psf. Local property company Magnus also enjoyed success with their new small suite scheme delivered at Arthur House, Chorlton Street.
Transactions completed in the Central Core (14) increased compared with Q1 and a total 27,155 sq ft was let during Q2.
We have continued our leasing success at Allied London’s pioneering new workspace Tower 12. The occupational market has really embraced the innovative working environment created and we secured three deals at rents of £18.50 – £20.00 psf (two deals in excess of 5,000 sq ft). The success of Tower 12 has been a significant factor in giving Allied London the confidence to take a similar leasing concept into the new build market with the launch of i plus – a new build development aimed at the TMT market, with construction due to commence in 2013.
During Q2 OBI were involved in 48% of the sq ft transacted within the city and therefore have a good idea of the real trends within the market. It is evident that there appears to be a widening gap in the type of office accommodation and pricing that active tenants are seeking and the product that the majority of landlords are still providing. It is certainly a market in which thoughtful refurbishment and design is required to secure leasing success.
We expect take up to continue to rumble along at an average of 50,000 – 60,000 sq ft let per month; this will only drastically change if large deals are successfully concluded. Aviva appear to have decided to remain in occupation and everyone’s eyes remain fixed on the large requirements of Jacobs (90,000 sq ft) and BUPA (160,000 sq ft).
It is certain that more hard work will be required during Q3 but those landlords who embrace and understand the evolving approaches occupiers are taking to the workplace will be best placed to succeed.
Will Lewis is partner of the OBI Property Offices department and please do not hesitate to contact Will if you would like to discuss the city centre market in greater detail.