‘Mega-deals elusive but signs promising’ – JLL
David Lathwood, lead director of JLL, analyses the North West property picture
SOME serious momentum was built in the region’s property market in 2014 – our team handled twice as many investment transactions as in the previous year, for example – and looking at the first half of 2015, things have continued apace.
The pre-election uncertainty felt in many sectors didn’t dampen the appetite of investors seeking out assets and, with plenty of money still looking for a home, the region – Manchester in particular – appears to be standing strong as the preferred market outside of London.
This appetite from major institutional investors for larger assets in the North West was demonstrated by L&G’s acquisition of a 50% stake in MediaCity.
It’s also another indication of the ‘northshoring’ phenomenon – with funds shifting away from the hotter markets in the capital and South East in the search for stronger yields. It’s also a sign of the growing maturity of what has been a landmark scheme for Manchester, and one that is primed for further development.
We’ve also had a sizeable foreign investment deal in the form of PATRIZIA Immobilien AG’s purchase of First Street.
Interestingly, a key element of that deal was the fact future phases at First Street are likely to include a new private rented sector (PRS) development of circa 500 apartments.
This would be PATRIZIA’s first such investment in the UK – a clear signal of the strength of PRS as an asset class in Manchester as the city’s residential continues to go from strength to strength with both capital values and rents increasing.
But money being money, it has to go somewhere and for that reason I’d chasten against getting too satisfied with the region’s performance just yet.
The true barometer for the strength of the market is in the readiness of occupiers – preferably from outside the region – to lay roots here.
On that front 2015 has so far seen more teases than pay-offs. Magic circle law firm Freshfeilds’ confirmation that it’s seeking around 100,000 sq ft in the city is welcome news but other mega-deals have proved elusive.
Of course at smaller end of the market the region is still seeing the kind of churn that made Manchester the best performing of the Big Six cities outside of London last year. That’s because the prevailing trend in real estate continues to be urbanisation and the fundamentals here – infrastructure, talent pool, quality of life and cost of living – are all compelling.
To capitalise on this we need an additional injection of stock in the city centre and a headline deal wouldn’t hurt in pumping some additional energy into the market.
