Limited supply will drive Manchester rental growth
THE diminishing amount of Grade A stock is beginning to impact on rental levels in the city, according to Savills.
Rates for vacant space in the city appear to have peaked and now stand at 11.7% of total stock, and the amount of Grade A space is currently 730,049 sq ft.
The firm noted that headline rents moved back up to £30 per sq ft following the letting to QBE Insurance at Chancery Place earlier this year, which is a 7.1% increase on the highest rent level achieved in 2011.
Head of the firm’s Manchester office, Patrick Joynson, said: “There are currently a number of large corporate requirements circulating Manchester’s office market, which if progressed, could devour much of the current available office stock.
“This, combined with a highly restricted development pipeline, will place upward pressure on rents, which we are already seeing in the sub-10,000 sq ft market.
“We expect this trend to continue over the next two years. Pre-let rents, however, will continue to remain competitive with the greatest influence on these being down to the cost of building and investment appetite.”
Mat Oakely, head of commercial research, added: “Manchester remains a diverse market in terms of occupier types and the fact that it doesn’t rely too much on either the public sector or banking and finance should ensure that take-up recovers sooner than some other markets.”
In terms of Manchester’s investment market, Savills reports that prime yields for assets with approximately 15-years security should reach a level of 5.75% to 6%. It also confirmed that the gap between prime and secondary space continues to widen and now sits at between 2-4%, 200 depending on location.
