Carlyle confident as market picks up

AFTER several tough years the Carlyle Group is confident about the prospects of its two Manchester schemes.

The London-based investment group has seen a large part of its Piccadilly Place office investment stand empty since it was acquired in 2009, and its sole tenant at the Soapworks in Salford, Vital Skills, collapsed months after signing a 10-year lease.

But Carlyle director Ben Du Boulay told TheBusinessDesk.com that agents are in talks with a number of potential occupiers for both schemes, reflecting improving demand across the city.

Last month Carlyle sealed a deal with Barclays for much of the 110,000 sq ft Four Piccadilly Place which has been empty since it was completed five years ago. The 80,000 sq ft letting, understood to be for £26.50/sq ft, has still not been publicly confirmed but plans have been submitted to Manchester City Council for the bank’s signage on the block. The deal follows Arup signing up for 20,000 sq ft at the 190,000 sq ft number three which is now 80% let.

Mr Du Boulay said: “Void costs are something that every developer has to be be careful about, and it’s expensive so it’s a good incentive to get cracking with the lettings. When we bought this [Piccadilly Place] in 2009 you probably would’ve had a different assumption on the business plan if you could foresee the difficult economy. We underestimated the scale of the recession and how long it would take to let vacant buildings.

“In Manchester the lettings market over the past three years has been incredibly difficult. It’s been very difficult for owners of grade A space. About 80% of lettings over the past three years have been on floor plates of below 10,000 sq ft, and below £20/sq ft. Grade A take-up has been pitifully low but it’s showing signs of picking up. It’s taken us much longer than we would have liked to let the building, but that’s purely down to economic reasons.

“Over the last six months we’ve let 112,000 sq ft which is evidence that the location and the price point is good. I’m comfortable with Piccadilly Place’s fundamental qualities and characteristics.”

Carlyle is also working on the 211,000 sq ft second phase of Soapworks – the regeneration of Colgate’s former factory on the banks of the ship canal in Salford. The first part, the 20,000 sq ft Boilerworks, was let to Vital Skills Training which fell into administration in December following the failure of the rest of the Vital industrial recruitment group. Mr Du Boulay admitted this was a setback but said there had been a number of enquiries for the space.

“What we’re selling is big open plan floor plates. It’s very contemporary, like a brand new warehouse and the big floorplates suit bigger occupiers regardless of sector.

“The Vital failure was very disappointing and I’m slightly surprised that a company that’s been around since the 1980s that provides training for infrastructure went bust when there’s been so much government spending on infrastructure. It’s very disappointing and a real blow, but the letting proved to us it was the right product at the right price. We’ve let it once and we can let it again.”

Quoting rents at the Soapworks are £15/sq ft, down on the £20-24/sq ft Peel is asking at its nearby MediaCityUK space.

“We do have a very good offer at a very good price, we do undercut the market and the space is effectively brand new. There are a number of very strong lets that we’re close to agreeing terms with. Interestingly they’re all different sectors.”

Mr Du Boulay added: “In the products I’m involved with I’ve seen a huge step change and at First Street they’ve had success with Trader Media. It’s fantastic to see the economy waking up and after having a rough time for five years it’s great to see occupiers on the move, and now is the time to get a great deal. But there’s not a huge ofamount of supply. No one has been developing for five years so there’s no overhang of space, so it doesn’t need much corporate activity to soak up what’s there and then you’re into the pre-let market.”