Regeneration, innovation and serviced offices tipped to drive city’s market in 2018

Andrew Cooke

The proliferation of serviced offices, city centre regeneration and innovation in workspace will be key themes for Manchester’s office market in 2018, according to real estate adviser Savills.

With just 382,000sq ft of grade A space currently available and 10-year average annual take up of 350,000sq ft, the firm also forecasts that rents will be pushed upwards next year and could reach £37 per sq ft by 2019.

Serviced offices have already shown considerable growth in Manchester, accounting for about 10% of city centre take up (to end Q317), up from 2% in 2016.

This includes WeWork’s acquisition of 100,000sq ft across Allied London’s One Spinningfields and Deka’s One St Peter’s Square, with further requirements in the pipeline.

The implications for 2018 are that serviced offices will absorb some of the smaller requirements in the market whilst also taking out the larger grade A supply, says Savills.

To the end of Q317, the business and consumer services sector led office take up with 17% of the total, followed by TMT with 15% of the total.

Andrew Cooke of the office agency team at Savills said: “Looking ahead, city centre regeneration, including large scale development sites and place-making opportunities such as NOMA, Circle Square and New Bailey, will see new commercial districts being established in Manchester.

“This will go hand in hand with innovation in workspace, as landlords and employers react to the changing needs of younger businesses through the creation of incubator, accelerator and business support services. This will centre around science and technology hubs in particular, such as Bruntwood’s Manchester Science Park and Alderley Park.”

Lack of supply will also be a key theme throughout 2018, says Savills, with no new developments due to enter the market until Worthington Construction’s 125 Deansgate in Q1 2019.

This will deliver 112,000sq ft of new grade A space, with Savills advising the landlord.

As a result of grade A supply diminishing, landlords are capitalising on high quality grade B refurbishments, with occupiers now looking at these as alternatives.

Examples include Aviva’s £20m refurbishment of 11 Portland Street, where 20,000sq ft was pre-let (to ETC Venues) and a further 13,500sq ft let (to Arm) within a month of completion.

Some of Manchester’s most significant office leasing deals of 2017 include 69,000sq ft to Clyde & Co at Hines’ Manchester Royal Exchange; 77,500sq ft to DWP at Deutsche Asset Management’s Two St Peter’s Square; 14,000sq ft to JMW at Mapletree’s 3 Hardman Street and 31,000sq ft to PHSO at Hermes’ Citygate.

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