M&G Real Estate’s office division plans to continue to be acquisitive in Manchester, according to head of business space Chris Perkins, with investment that could run into “hundreds of millions of pounds” for the right proposition.
M&G published its UK market outlook this week, which said demand for office space in Manchester has proven resilient, and the shortage of Grade A stock is set to support rental growth.
“Manchester is a location we’re very actively investing in, and there’s a reason behind that,” Perkins told Place North West.
“We’re increasingly diversifying our funds, and the regional office market gives us a chance to do that, whether that’s building or buying. Volatility in Manchester is less than that in London, so investing in the city smooths our large portfolio exposure across the UK.”
M&G Real Estate is the property fund management arm of M&G and has more than £27bn invested across the UK, Europe, America and East Asia.
In Manchester, M&G recently acquired Ask’s 101 Embankment in Greengate for £105m, and also owns 50 Fountain Street, 1 Hardman Boulevard and 3 Hardman Square. Planning permission was granted for the 92,000 sq ft Brazennose House in 2016. Perkins said the investor was looking for assets which provided opportunities for rental growth, but was also confident the new-build Brazennose would deliver a healthy rent.
“Rents in the city are already sustainable at around £35/sq ft,” he said. “So when Brazennose is completed in a couple of years’ time it could also command a rent at that level.”
Perkins said M&G was “fully committed and in the process of putting a timetable in place” for a start on site at Brazennose in Lincoln Square.
Perkins said that a number of M&G’s pension funds were focused on office opportunities, and fund managers were on the lookout for “high-quality, Grade A and futureproofed stock, which can withstand the test of time”. The investor manages £270bn in assets for its clients, and is seeking a mix of assets with different risk profiles.
Sam Jones, associate director of asset management at M&G Real Estate, described the Manchester office market as “in good health” and predicted that office investors would “remain confident in years to come.”
Pointing to the assets already owned by M&G around areas such as Spinningfields, he said that “quality products in core locations, with a strong F&B offer” would remain consistently appealing.