Big Nine report shows promising property signals for Manchester and Liverpool

Redfern Building in NOMA

The North West’s two powerhouse cities are beginning to emerge from lockdowns in  confident mood.

After a year of prolonged uncertainty, research has shown that Manchester’s recovery is under way.

According to the latest data from Avison Young’s UK Cities Recovery Index, the city’s commercial activity is performing at a promising 92.8 – a clear indication that Manchester is beginning to emerge from the shadows cast by COVID-19.

Avison Young has created the UK Cities Recovery Index to help monitor the way in which the pandemic is impacting the UK’s major cities.

It enables up to date assessments and analysis of the rate and trajectory of the recovery and identifies trends that will determine the future of the property sector, cities and of society as a whole.

The Sector Indices are combined into an overall Recovery Index score, which illustrates the evolution of urban impact and recovery over time since February 29, 2020, before COVID-19 hit the UK.

Although there is still a long way to go, the latest Recovery Index data reveals that all business confidence surveys have recovered from the six month low in January, with Manchester recording 106.6 at the end of March, similar to the national figure.

This is just shy of the previous high of 108 at the end of July and compares with 37.2 at the end of April last year.

As would be expected, other sector indices, such as retail, hotels and leisure, have all increased since lockdown restrictions lifted on April 12, with non essential retail, as well as outdoor hospitality all now open. The past week has seen a sharp increase in the hotels and leisure sector index, from 20.7 on April 11, to 33.1 on April 25, with retail peaking at 99.6 on April 25, as footfall soared.

Manchester’s return to office figures are proving slower to recover, with the sector index sitting at 45.3 on April 25, not far off its previous highest point of 47.8 on September 16.

While Avison Young’s Big Nine data showed that office take up figures during the first quarter of of 2021 were below the 10-year average, Manchester still secured the highest lettings figures of the UK cities recorded.

This indicates that there is still a healthy demand for a return to office working, with the public sector, in particular, leading the commitment, following the 30,240 sq ft letting to the NHS at St James’s House in Salford, 24,548 sq ft to the Ministry of Justice at the Redfern building in the NOMA district and the Department for Work and Pensions securing 14,908 sq ft in Stretford.

Chris Cheap, principal and managing director of UK regions at Avison Young’s Manchester office, said: “The dramatic increase in footfall in central Manchester since restrictions were lifted earlier this month has been a huge boost to the challenged hospitality and retail sectors.

“With people back on the streets, Manchester feels like a city awakened and, with continued positive market signals from the office sector, it is anticipated the return to work numbers will see the same uplift on our Recovery Index following the next milestones on the opening up route map.

“Although the office market was more subdued than in previous years at the start of the year, against the backdrop of a third national lockdown, Manchester still performed well.”

He added: “Lettings within the quarter continue to illustrate the city’s broad sectoral appeal and ability to offer a range of workspace, which speaks effectively to a variety of audiences. The public sector is an important driver for the market at the moment and we anticipate more of the same as the year progresses and more posts head north as a result of the commitment to ‘levelling up.’

“Although there is still a long way to go, it’s reassuring that the data in both our Big Nine and UK Cities Recovery Index reports confirm the feeling of optimism in Manchester as footfall and sentiment continues to increase.”

The report also shows that sentiment is improving in the Liverpool office market, with enquiries and viewing activity beginning to increase.

However, this increased optimism did not impact take-up figures for the first quarter of 2021, which amounted to 23,572 sq ft in the city centre and 54,930 sq ft out of town, overall 41% below the 10-year quarterly average.

The two largest lettings for the city centre and out of town markets during the quarter were the 20,020 sq ft letting to the Department of Work and Pensions at 90 Duke Street, and Instant Offices taking a lease on 9,430 sq ft at Liverpool Innovation Park, respectively.

Despite the lower than average take up figures for Q1, the latest data shows that over the past week, the Return To Office Sector Index for Liverpool has observed the strongest growth of 2021 so far, and now reads at 56.7 as of April 26.

Although there has been no change in government advice for individuals to work from home where possible, this growth suggests that there is an appetite to get back into the office.

Ian Steele, principal at Avison Young’s Liverpool office, said: “We started the year with another national lockdown, which has obviously had a negative impact on take up figures for Q1, but there has been an improvement in both sentiment and demand during the past couple of months which will hopefully translate into transactional activity in the second half of the year.

“Occupiers continue to undertake strategic reviews of their existing offices, with many exercising breaks, regearing leases or looking to downsize and acquire better quality space, with a greater emphasis on health and wellbeing, flexibility and amenities.

“This is primarily down to an increase in occupiers adopting a more flexible approach to working practices offering employees and staff a combination of both home and office working, which is likely to continue once restrictions have been lifted.”

He added: “Once businesses start to return to the office, this is likely to be the catalyst for many occupiers to start to revisit and reactivate their occupational requirements which is already being reflected with an increase in demand and the number of transactions in lawyers’ hands.”

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