Posted 1 September, 2015 OBI BLOG
Following a bumper start to 2015, the healthy level of demand for office space in Manchester city centre continued into the most recent quarter with take up totalling 359,829 sq ft.
The prime core, as with Q1, was the most popular area of the city in Q2 with 22 of the 81 transactions recorded taking place here. The Portland Street corridor has also continued to thrive with 15 transactions. Interestingly two of the most noticeable deals of Q2 were agreed with occupiers in the education sector with QA who took 22,855 sq ft in St James’s Building and New Collage Manchester who took 16,439 sq ft in 9 Portland Street. This location has always remained popular with the education sector due to its close proximity to the universities.
The recent trend of inward investment continued into the most recent quarter with Ford Credit taking further expansion of around 20,000 sq ft at First Street. Additionally, since Freshfields announced they there were opening a global service centre and stated that they would grow the Manchester team to 700 staff they have committed to 42,739 sq ft at Arndale Tower. This is a short-term solution ahead of a larger more permanent move in 2017 when a number of new schemes will be competing to house the requirement. It is rumoured that these include; Hanover Buildings at NOMA, 1 New Bailey in Salford and 101 The Embankment all of which are to be delivered mid-2016 to early 2017.
Although Q2 only saw 9 transactions over 10,000 sq ft, those 9 lettings accounted for 66% of total take up. This is up on the first quarter where transactions greater than 10,000 sq ft accounted for 42% of total space transacted. One of the large transactions was to the leading digital marketing agency Code Computerlove who took 13,106 sq ft at Sevendale House. This was off the back of a long string of lettings at Sevendale over the past 6 months to the likes of Ticket Master and Liquid Personnel.
In terms of new refurbishments July saw the launch of 19,155 sq ft at Queens House which OBI Property purchased on behalf of CBRE Global Investors last year. Our Workplace Consultancy team then interior designed and project managed the new scheme to include a striking new entrance and communal areas, with fully refurbished offices incorporating exposed mechanical and electrical services and a central light well with feature green walls. Following the recent flurry of buildings being traded in central Manchester, landlords have commenced the refurbishment of their new assets which means we will see more refurbishments being delivered towards the back end of this year and throughout next year.
As the year progresses the market continues to improve and we are continuing to see concession packages reduce with discount rates of 15% being offered in some of the more sought after buildings in the city. This equates to 9 months over a 5 year lease and 18 months over a 10 year term. This demonstrates the continued theme of occupiers are thinking more about the working environment rather than just the associated costs.
Total take up for H1 2015 now stands at 688,743 sq ft, this is down on H1 2014 which was 775,871 sq ft. This could be a result of the limited ‘standing stock’ of Grade A buildings offering large floor plates in excess of 15,000 sq ft. It is expected as the current development pipeline is delivered that it may see pent up demand quickly satisfied with 2016 /2017 already shaping up to be positive years.