Manchester office take-up rises, however, Liverpool suffers lack of Grade A space

Manchester enjoyed increased take-up in its office sector during the third quarter, but Liverpool is still constrained by the shortage of Grade A space.

The latest ‘Big Nine’ report by real estate specialist, Avison Young, focusing on the UK’s nine major cities, showed that the Manchester office take-up was up24% on Q2, making it the most active quarter since the beginning of the pandemic (Q4 2019).

The city centre saw 12% more space let than 10-year average quarterly levels, while the out-of-town market was 37% higher. The quarter saw four serviced offices deals, totalling 74,937 sq ft.

Other key deals included diagnostics firm Yourgene’s expansion to Manchester Science Park (43,029 sq ft), the Government Property Agency taking the final 36,375 sq ft at 101 Barbirolli Square, as well as RSM’s downsize from Spinningfields to 14,000 sq ft at Landmark.

Just under 208,000 sq ft of Grade A space was let in Q3, 14% more than last quarter, demonstrating continuing demand for quality. Average achieved rents were £24.50 per sq ft, while the prime rent remained unchallenged at £39.50 per sq ft.

Rupert Barron, director in Avison Young’s Manchester office agency team, said: “Whilst we have seen an uplift in take-up, enquiry and viewing levels have softened and we have some obvious concerns about how macro-economic conditions and political uncertainty will impact take-up numbers.

“Traditionally the occupational market takes longer to react to these outside influences and we may not see the true impact until early next year as relocation decisions are deferred until there is more certainty. At the moment there is sufficient demand and space under offer to suggest we will see a year-end take up surpass one million sq ft, however, plans are constantly being reviewed against the wider economic backdrop and we may see positions reconsidered.”

Rupert Barron

He added: “That said, our Big Nine data show us that the central Manchester office market has depth and is robust, despite all the difficulties we have had to navigate over recent years, and we are firmly of the view that this will continue to be the case as businesses pivot and adapt their real estate strategy accordingly.

“There is still a clear need for sustainable, engaging workspaces and we can take comfort that Manchester has the backdrop of a varied and diverse offer to meet evolving demand.”

The latest Big Nine data shows that city centre available office stock fell for the second consecutive quarter as a result of the strong take-up figures and a constrained development pipeline – availability has fallen eight per cent since Q2.

Rupert added: “The prime market is clearly most susceptible to the outside influences described above, however, the squeezed pipeline of new build development means that careful consideration needs to be given and good quality advice taken to inform strategy. Supply chain issues and build costs may potentially lead to a period of under supply of newly constructed workspace and, therefore, businesses may have to look beyond current economic uncertainty to secure the right space to underpin commercial aspirations over a much longer period.

“Over a third of space of developments due to be completed in the period 2022-2025 has already been pre-let.”

Meanwhile, in Liverpool, take-up was nine per cent down on Q2 and 12% down on the 10-year quarterly average, with city centre take-up just two-thirds of the five-year pre-COVID quarterly average (ie Q4 2014-Q4 2019).

The total quarter take up was 114,000 sq ft, with 63,000 sq ft of that being in the city centre, and the remainder in the out of town markets.

Notable deals during Q3 included Barnett Waddingham’s 8,700 sq ft relocation from the Port of Liverpool Building to the Royal Liver Building and Causeway Technology’s 9,100 sq ft deal at the recently completed Hythe at Wirral Waters.

No Grade A space was let in the city centre during Q3, which is primarily down to the lack of good quality stock and a decrease in the number larger requirements. The market is currently being driven by sub-5,000 sq ft transactions.

A high percentage of occupiers are currently reassessing their spatial requirements and deferring decisions to take new space, while many occupiers that are approaching lease events are looking to downsize and acquire better quality space.

Subdued development delivery in the aftermath of the global pandemic, however, means that many such occupiers are unable to find the quality of space they need. Overall, city centre availability is approximately 568,000 sq ft and it continues to contract.

Office availability is around half (56%) of what it was five years ago, and just a third (31%) of what it was 10 years ago, with an availability rate of 5.4%, leaving Liverpool’s office availability amongst the lowest across the Big Nine UK cities.

Ian Steele

Average rents were £20 per sq ft in Q3, not far shy of the prime rent of £25 per sq ft, despite no Grade A space being transacted during the last quarter.

Ian Steele, principal in Avison Young’s Liverpool Office agency team, said: “The lack of availability of Grade A office in the city still remains a concern to the occupational market and any new development will require significant pre-commitment before new space can be delivered.

“Demand for good quality space remains high, and those landlords and investors who have committed to upgrading and refurbishing space, providing tenant facilities and amenities have managed to secure new occupiers and, in most cases, have been able to justify increases in headline rents.”