Manchester snapshot - July 2013

Overview

• Net stock absorption (NSA), while not matching the total for H2 2012 has remained strongly positive. H2 2012 was skewed somewhat by the completion of the new Co-operative headquarters at One Angel Square but the total of +122,128 sq ft for H1 2013 suggests that underlying demand for office space is gaining traction. Demand for Grade A office space was emphasised in the figures with Grade A occupation levels rising by over 100,000 sq ft in the first six months of 2013 (see Figure 2).
   
• Total take-up for H1 2013 was marginally up on the previous six months (see Figure 3), although it underperformed in the City core. Central Manchester take-up for the period totalled 457,180 sq ft, the highest half year total for 2.5 years. Take-up in Piccadilly, Castlefield and the Northern Quarter rose for the second successive half year period. With just one deal above 25,000 sq ft to Travel Jigsaw (63,096 sq ft) at Sunlight House, the emphasis remains firmly upon the sub 10,000 sq ft market which continues to underpin demand. There is increasing evidence of expansion amongst occupiers in that size band who are beginning to seek additional space.
   
• Grade A supply remains constrained with availability falling by 15% in the past 12 months (see Figure 1). In the City core the equivalent figure is higher at 17% and Grade A vacancy has continued its downward trajectory. Across Manchester Grade A vacancy has fallen from a high of over 30% in 2010 to its current level of 15%. We anticipate that figure falling further to near 10% by the end of 2013.
   
• Headline rents remain stable at £30 psf. This was confirmed by the recent deal to WorldPay (22,000 sq ft) who took a 10 year lease from Credit Suisse at 3 Hardman Square, M3. While Grade A product is diminishing, there remain available units that are capable of driving prime rental growth in the short to medium term (see Figure 5). We anticipate further increase in net effective rents over the next 12 months.