City centre office market continues strong upward trajectory
The Manchester Office Agents Forum (MOAF) has reported another strong quarter of performance with approximately 490,000 sq ft transacted within the city centre market during the second quarter of 2019.
Manchester city centre enjoyed a strong half year with approximately 805,000 sq ft transacted in the first half, an increase from the 757,000 sq ft transacted in the same period last year.
Serviced and co-working operators were the stand-out performers in Q2 2019 with WeWork acquiring 51,000 sq ft at Hyphen, Mosley Street and Spaces (Regus) acquiring 125 Deansgate in its entirety.
At 122,000 sq ft, the deal to Spaces represents the largest transaction of the year so far.
Other significant transactions include WPP acquiring 82,000 sq ft at Enterprise City and Barclays expanding by 33,000 sq ft at Piccadilly Place.
The supply of Grade A office accommodation remains at a record low, which has led to further rental growth in both the Grade A and Grade B refurbished markets.
Prime rents of £36.50 per sq ft have been achieved in the first half of 2019, with further rental growth expected as the Manchester office market continues to exceed expectations.
Scott Shufflebottom, associate director in Colliers International’s national offices team, said: “Despite uncertainty in the property market being a recurring theme since the 2016 referendum, the Manchester office market has continued to prosper and has achieved unprecedented levels of take-up and rental growth, showing great resilience and further underpinning its position as the second city.
“The quality of both existing and proposed developments, coupled with a strong pipeline of pent-up demand both from indigenous and inward investing occupiers ensures that confidence remains strong in Manchester’s office market.”
The combined regions of Old Trafford and Salford Quays saw take-up of 67,955 sq ft for Q2, boasting a half year total of 122,323 sq ft, surpassing the 2018 H1 figures by almost three per cent.
Furthermore, activity levels were also on the rise, with the region experiencing a total of 59 transactions which is a substantial increase of 31% on H1 2018.
Significant transactions within the region during 2019 included Marks & Spencer taking 12,012 sq ft at the Alexandra, The Home Office taking 20,490 sq ft at the Soapworks, and Capgemini taking 11,364 sq ft at Venus.
Richard Dinsdale, director at Edwards & Co, said: “Whilst there is a diminishing supply within the Old Trafford region, predominantly due to a number of office buildings being the subject of residential redevelopment, the Salford Quays supply still remains buoyant due to the recent refurbishment schemes at the likes of Anchorage 1 & 2, Voyager & the Victoria, with the three properties alone totalling over 200,000 sq ft of newly-refurbished office space.
“Furthermore, there’s exciting times ahead regarding the development pipeline, with Peel Media and L&G having just secured finance to develop the next phase of MediaCityUK, which is set to include up to 540,000 sq ft of offices over the next 10 years.”
South Manchester experienced a relatively positive second quarter with take up reaching 139,198 sq ft, almost identical to Q1, providing a total H1 2019 total of 277,271 sq ft for the region.
Comparatively to last year, while there was a 23% reduction in space let during the first half of 2019, and approximately 20% less transactions, it’s important to remember that 2018 was a record-breaking year for South Manchester by some margin.
Using a record year as a basis for comparison will, undoubtedly, create an element of distortion when analysing the market performance.
The take-up for H1 2019 remains healthy and South Manchester continues to be the leading regional market outside of the city centre, even out-performing Birmingham over recent times.
Sizeable deals of note during the first half of 2019 include Verastar taking 61,000 sq ft at Dovecote, Smart DCC taking 33,591 sq ft at Brabazon House, and Landis & Gyr taking 18,708 sq ft at Trident, the later transactions being located at Manchester Airport.
Richard Dinsdale added: “Take-up is healthy and demand remains stronger than ever within the South Manchester regions, and whilst 2019 is not set to be another record year, there are a number of significant lettings in the pipeline which will bolster the figures.
“We anticipate the 2019 take-up to finish close to the five-year average.”
MOAF members include: Avison Young, BE Group, CBRE, Colliers International, Canning O’Neill, Cushman & Wakefield, Edwards & Co, Hallams Property Consultants, JLL, Knight Frank, LSH, Matthews & Goodman, OBI, Savills, Sixteen Real Estate, and TSG Property Consultants.