An oversupply of office and industrial stock is threatening central Manchester, according to a report released by Colliers CRE today.
The report states central Manchester's total office stock was 16.2m sq ft last year, and had risen by 5% in the past 18 months.
In its Manchester Market Overview, Colliers said 1m sq ft of office space was due for completion this year, with a further 1.1m sq ft of space, backed by full planning permission, scheduled over the next two years.
The report examines Manchester's property market: residential, office, industrial, hotels and retail, and reveals which of these areas will grow and which will stagnate.
The report states: "With bank funding unlikely to return to favourable rates for at least another 12 months and with the occupational markets now showing negative monthly rental growth on a national basis, capital values are likely to continue falling for the next 18 months.
"We forecast that yields in the North West region will move out in all sectors in 2008, with offices likely to see further outward yield shift in 2009. Notably, though, the Manchester market has so far proven to be more resilient to falling values than the region as a whole."
According to the report, this resilience will first be noticed in the retail sector 'in 2009 with further improvements in 2010' but rental values will perform below the UK average because the average figure will be boosted by a strong performance in central London.
The industrial sector is also predicted to weather the worst of the current economic downturn and 'tick along' in line with the national average.
However, the commercial office sector in Manchester is regarded as the sector to be worst hit.
The report states: "…office rents will perform far worse than the 'UK excluding London' benchmark…due to the large development pipeline in Manchester, with some very large projects due for completion in 2009 and 2010 yet to have secured pre-lets."
Stephanie Mullenger at Colliers CRE Manchester, said: "The city's office sector in particular will have to adjust and the efforts to bring in new companies from outside of the city will have to continue in order to fill the office space that is in the development pipeline."
Nevertheless, the report does stress Manchester's expanding and varied retail offer makes it a "beacon of retailing" in the North West and regarded by most retailers as the UK's second city ahead of Birmingham.
The report also adds the "real success story" for Greater Manchester has been strong growth of the financial and business services employment, which grew by almost 30% over the past decade, more than double total employment growth of 13.5% over the same period.