Colliers International has predicted that Manchester will run out of ready-to-occupy prime office space by the second quarter of this year, as take-up outstrips the delivery of new supply.
According to the firm’s latest Net Stock Absorption research, the shortage of supply is due to the high rate of take-up from local, national and international firms in the city, combined with a number of pre-let deals eroding the pipeline of new buildings.
In 2015, Colliers recorded Manchester office take-up as 1.3m sq ft, just short of the total for 2014 and 37.5% above the ten-year average.
Around half of the deals were lettings on offices of more than 10,000 sq ft.
Grade A offices accounted for almost one third of all transactions, twice the amount of previous years, while the supply of prime space in central Manchester declined by 61% compared to 2014, the lowest level since 2006.
There is currently 216,000 sq ft of Grade A stock available to let across the city including at schemes such as 1 St Peter’s Square, 40 Spring Gardens, 3 Hardman Square and 3 Hardman Street.
There are several offices currently under construction, such as English Cities Fund’s One New Bailey, Allied London’s XYZ Building at Spinningfields, Ask Real Estate’s 101 Embankment at Greengate, Mosley Street Venture’s 2 St Peter’s Square and Allied London’s 1 Spinningfields. However, these offices are not due for completion until late 2016 to 2018, and both XYZ and One New Bailey are reportedly already fully let.
Across the city there is 1.39m sq ft of offices across eight buildings with planning permission. Of this, 39,750 sq ft is already pre-let and a further 13,250 sq ft is under offer. This leaves 1.33m sq ft available including schemes due to start at Astley & Byrom House on Quay Street, 11 York Street, Landmark at St Peter’s Square and NOMA’s 2 and 3 Angel Square.
Peter Gallagher, director of national offices at the Manchester office of Colliers International, said: “Whenever I have been asked to comment on new Grade A office space at almost any time in the past 25 years I have been able to talk about the choice of available supply, and having that ‘ready to walk into’ stock to accommodate footloose in-movers has been central to the city’s offer and appeal.
“Today it’s a wholly different story. Given the current level of Grade A office take-up and the expected completion of lease transactions presently under offer, the Manchester office market is likely to experience an unprecedented complete absence of ready to occupy supply of best quality Grade A space by the middle of 2016.
“Even though the amount of consented developments is sizeable, the lack of readiness and availability of funding for a speculative start on construction is likely to delay or disrupt the early delivery of a number of schemes to the market and even those ready to start will not add to supply until at least 2019.
“We further expect that the majority of Grade A stock currently in-build will also be let well before practical completion, leading to the growth of a well-established pre-let office market in Manchester. People are just going to have to get better at anticipating their space needs a lot earlier.”