Latest property report reveals impact of coronavirus pandemic

The Spine building in Paddington Village

The latest Avison Young Big Nine property report reflects a tale of two cities for the North West.

Both Manchester and Liverpool experienced falls in activity over the second quarter of the year, although Liverpool fared worst.

Take-up during the period in city centre Liverpool was 83%, while in Manchester it declined by 79%.

Out of town take-up fell by 54% in the Liverpool region, and 42% in Manchester.

Total take-up was down 77% in Liverpool, and 64% in Manchester.

There was 209,000 sq ft of take-up in Manchester over the second quarter.

Of the 26 deals that transacted, five were more than 10,000 sq ft and the two largest were in the out-of-town market.

These were USDAW taking 38,900 sq ft at Voyager in an owner-occupier sale of £12m, and Marlowe Fire & Security taking 25,568 sq ft at 5 Central Park.

Out-of-town take-up actually increased from the first quarter, though total take-up was down from the previous quarter while being far below the 10-year quarterly average.

The largest city centre deal was Trusted Mortgages, taking 14,200 sq ft at Cardinal House.

There were four other city centre deals above 5,000 sq ft involving firms from the legal, computing and insurance sectors, as well as Ashfield Health taking 9,100 sq ft at City Tower.

A smaller deal of interest was Simplisafe taking 2,400 sq ft at Bauhaus on Quay Street for an eye catching £37.50 psf.

Manchester city centre has 1.5 million sq ft of space under construction at the moment.

Of this, 46% is already pre-let, including all of the 307,000 sq ft being built at Enterprise City.

While a number of schemes’ completion dates have been pushed back, there are large amounts of available space due to complete in the fourth quarter at No. 1 and No. 2 Circle Square by developer Bruntwood Estates, as well as at 100 Embankment.

The COVID-19 pandemic has yet to test headline rental levels with any downward pressure.

As a result, city centre rents remain at £36.50 psf with a 24-month rent free period, while out-of-town rents remain at £24.00 psf.

Chris Cheap, principal at Avison Young’s Manchester office, said: “It is testament to the robusticity of the central Manchester office market that even in the depth of lockdown it still outperforms other regional cities, however, the reduction in market capacity is plain to see and is indicative of a somewhat paused market place.

“We are not even at the end of the beginning of understanding the depth of the impact on the wider office market as occupiers concentrate on their core business and, where possible, delay real estate decisions.

“We are, of course, seeing some people seeking space and businesses with critical lease dates or opportunities to ‘right size’ immediately are in the market and we are still getting deals done, but in significantly reduced numbers.

“The lower number of transactions has resulted in headline rents and incentive packages not yet being tested by upward or downward pressure.

“We have also yet to see any grey space entering the market, which may well impact upon the city’s supply and demand dynamic in the short to medium term.

“Whilst there are some very positive notes we can take from the Q2 data and performance through July, it is important to be realistic about some of the bumps in the road that may be coming.”

The latest figures reveal that total city centre office take-up in Liverpool was around 20,000 sq ft during the second quarter of the year, which is well below the five-year quarterly average.

The largest deal in the city was law firm Taylor Wessing, taking 12,700 sq ft at Edward Pavilion.

However, the out-of-town markets experienced a slight increase in demand in comparison with the previous quarter, with viewing activity picking up in the second half of the quarter.

As a consequence, there were several small lettings in the out-of-town market totaling 15,000 sq ft in locations such as Wavertree and South Liverpool.

Ian Steele, principal in Avison Young’s Liverpool office, said: “Like all cities across the Big Nine report, COVID-19 has had a significant impact on the city centre office market, with the majority of occupiers either delaying or putting their occupational requirements on hold indefinitely, whilst undertaking a strategic review and reassessment of their spatial requirements.

“On a more positive note, following the easing of the lockdown restrictions, there has been an increase in demand and viewing activity from smaller occupiers who are generally looking to acquire space on more flexible short-term leases.

“Despite this, we expect take-up levels will continue to be restricted in Q3, with many of the larger occupiers adopting a more cautious approach.”

Elsewhere in Liverpool, The Spine at Paddington Village, is currently under construction and when completed in the fourth quarter, will provide 160,000 sq ft of quality office space, of which 50% has been pre-let to the Royal College of Physicians as its new Northern home.

Avison Young’s Big Nine report covers the nine major cities outside of London: Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Liverpool, Manchester and Newcastle.

Close