Manchester’s massive office space shortfall
AN additional four million sq ft of office space is needed across Manchester in the next decade in order to keep pace with demand.
According to new research published by international real estate adviser Savills, the city’s housing market also faces similar challenges, with new homes currently being built at less than half the rate needed.
The number of office workers in Greater Manchester is set to grow by about 36,000 by 2025 as more companies look to ‘north-shore’ or grow their existing presence in the city.
One million sq ft is set to be delivered in the city over the next three years, with a further 500,000sq ft of refurbished space in existing buildings planned, but this still leaves a deficit of about three million sq ft between supply and demand.
At the same time, the resident population of Manchester is forecast to rise by 65,500 over the next 10 years, requiring some 9,650 new homes a year.
Current delivery is falling some 5,100 below this need. At prevailing rates of provision of new homes in the city there will be a shortfall of 51,000 homes in the next decade in Greater Manchester.
The resulting imbalance between supply and demand against a backdrop of an improving economy and the city’s low average house prices – at £111,567 compared to the England & Wales average of £186,553 – indicates real growth potential, says Savills.
As such, Manchester has become a real focus for investors including housing associations, private companies, UK and European institutions, and private equity as well as overseas capital from the Middle East, China and US, but much more is needed, with scope for mixed use development in the core central district, around Piccadilly and Oxford Road.
“Manchester’s underlying strengths and well-established education, financial and business services sectors have already served to create 57,000 more jobs in the city since 2011, and with more companies now looking at the city as a potential location to ‘north-shore’ demand for office space is heading in only one direction,” said Mat Oakley, director and head of European Commercial Research at Savills.
Savills forecasts that most new commercial space is likely to be delivered around the existing cores of Spinningfields and Piccadilly, but with prime office rents in these locations predicted to rise from £33 per sq ft to £37 per sq ft by 2019, existing occupiers may begin to find these areas unaffordable.
MediaCity UK and Salford Quays, the Salford/Irwell corridor, Southern Gateway and South Manchester’s business parks all have the potential to deliver more affordable accommodation for cost-conscious occupiers, according to the research, but with current levels of availability there is likely to be a shortage of mid-priced refurbished office space suitable for TMT and SME companies which will not be filled by the major developments in the pipeline.
James Evans, director, Office Agency in Savills’ Manchester office, added:
“Manchester continues to boom with relatively affordable living and commercial space stimulating continued demand for offices from indigenous, north-shoring and inward-investing businesses.
“While this is good news for landlords, investors and developers, if we fail to keep pace with demand the city’s ongoing growth prospects could be jeopardised, with businesses relocating or looking elsewhere if they can’t find space that fits their requirements. The planning process needs to carefully balance the need for more offices against the equally pressing requirement to deliver more homes, as these new employees will need somewhere to live as well as work.”
