Manchester office rent rises unlikely until 2013, says Colliers

THE lack of new office development in Manchester is unlikely to feed through into rises in Grade A rents in the city until 2013, according to Colliers.

Speaking at a presentation at the firm’s Manchester office, Guy Grantham, a director of research and forecasting, said that take-up off space is likely to reach around 600,000 sq ft in the current financial year, which will put it below the long-term average for the city.

“By 2013, Manchester will have reached a tipping point due to the lack of new space coming onto the market,” he said.

He added that with no new development currently likely to complete during 2013, take-up rates of the remaining Grade A stock should have reached a level whereby landlords are able to begin dictating terms. Already, he said that take-up of Grade B space is outstripping Grade A as occupiers begin to look at alternatives.

Grantham also pointed out that around 700,000 sq ft of existing leases are due to expire over the next 3-4 years. Currerntly, around 17% of Manchester’s 17.7m sq ft of total office space is vacant, although vacancy rates in the 985,000 sq ft of Grade A stock in the city is much lower.

Walter Boettcher, a director at Colliers’ Research and Forecasting team, said that although there were some major property requirements, uncertainty in the marketplace meant that many of these were failing to translate.

He added that the recent riots in Manchester, Birmingham and London had also led to overseas investors push back decisions to invest in the UK’s property market.

“Company liquidations remain high but stable but there are signs of increasing stress with companies now having trouble to pay interest on loans rather than struggle to repay capital and interest”.

Boettcher said that the feeling among Colliers’ own property management team was that more administrations are likely in the sector as the current lack of economic growth dampens demand for space.

He argued that the priority for Government is to facilitate growth, which will become more difficult given that the impact of the first round of quantitative easing in the UK had largely dissipated.

GDP targets are continuing to be revised downwards and that Purchasing Managers Institute indices predict GDP will shrink by 0.2% in the third quarter.

He predicted that growth was most likely to come from overseas investment, and that the UK could potentially benefit from Chinese frustration with the downgrade of the US economy. Plans have already been announced for London to become an offshore centre for the Chinese currency, the renminbi, and Boettcher said that Chinese interest in acquiring finance and distribution companies could kick-start a wave of mergers and acquisitions that could boost demand for space across the UK.

He also said that public sector cuts on were likely to have little impact on demand for office space, particularly Grade A, as private sector growth should outstrip job losses in the public sector.