Boom in city office refurbishments

SOME 625,000sq ft of office space in Manchester is set to be refurbished over the next two years as the market responds to continuing levels of healthy take up.

This is according to real estate adviser Savills which says that Grade B space has accounted for an average of 62% of the city’s annual take up over the last 10 years and with Grade A supplies running low that figure could increase during 2016 as occupiers and landlords look to “plug the gap”.

Despite growing demand for Grade A office space in Manchester over the last three years, annual take up has consistently been underpinned by larger Grade B occupiers seeking to balance high quality offices with value for money.

As a result, Savills expects the current planned refurbishment pipeline to last little over two years.
 
Increased competition for the space is already driving secondary rents upwards. For example at Acresfield in St Ann’s Square where rents have moved from £16.50 per sq ft to £18.50 psf in just over 12 months.
 
In terms of occupiers, Savills reports that the TMT sector has taken more Grade B space in Manchester than any other sector over the last five years, with deals totalling 710,889sq ft.

This is a significant increase on the 294,631sq ft of secondary space let to TMT occupiers in the previous five years.
 
Grade B demand from professional services and business and consumer services firms has also been significant, with deals totalling 595,665sq ft and 546,738 sq ft respectively since 2011.

Clare Bailey, associate director in the research team at Savills, said: “Much has been made of the TMT sector as a rising star and it has indeed grown significantly.
 
“However, the term encompasses such a breadth of occupiers that it is perhaps more accurate to think of the growth of ‘new’ occupiers, namely those seeking to capitalise on technology developments and new media.
 
“Many operate within long-standing sectors such as finance and insurance but are now seeking more creative workspaces.

“The challenge for landlords and designers, given the rate of construction inflation, is to create these workplaces at a commercially viable cost for such businesses which often have immature financial covenants and need shorter term leases to allow them to grow.”