The answer to whether Manchester’s office market can weather the storm lies both in its history and its future, writes Will Lewis of OBI.
The city’s aggressive post-recession growth and carefully laid plans have meant the area has been uniquely equipped to deal with the problems foisted upon it by the pandemic.
10 years of unparalleled growth
Since 2011, Manchester has achieved more growth in its office market than any other regional city. It records on average 1.2m sq ft of take-up each year, higher than any city outside London, according to OBI figures. The 10-year average in the other five main regional hubs – Bristol, Leeds, Birmingham, Edinburgh and Glasgow – ranges from 580,000 sq ft to 800,000 sq ft.
More than 3.7m sq ft of new build office space and major refurbishment has been delivered in Manchester in the past 10 years, with Grade-A take-up averaging 475,000 sq ft each year. Importantly, most of that space is let. There is currently around 2m sq ft of new office space under construction or refurbishment, and despite the pandemic, more than 50% has already been committed to pre-completion stage.
The city has a track record for securing large lettings before or during construction of a development, with 26 new leases recorded over the past decade on this basis. Edinburgh comes closest to the levels of Manchester’s success, with 13 pre-completion deals brought forward in the same period.
The success of the office market has been built on the city’s ability to attract large occupiers. When it comes to the size of lettings, Manchester is superior to any other regional city, with 80 lettings transacted to businesses employing more than 200 people, totalling 3.7m sq ft over the past decade. In the same period, Birmingham, Bristol, and Edinburgh secured 35 deals for over 200 persons, and Leeds and Glasgow converted 51 large transactions.
Manchester hosts exciting growth enterprises, with brands such as WPP, Booking.com, Boohoo and AO.com continuing to expand their presence. It also outperforms other cities in its ability to attract major inward investors, with the likes of Amazon, AutoTrader, MoneySuperMarket and Freshfields setting up global centres. Other cities rely on government consolidations or financial service businesses cost-cutting by relocating from London. Manchester, on the other hand, is packed full of exciting growth businesses powered by technology.
The strength of its occupational market provides the confidence to consistently attract international investment from overseas funds and developers.
From textiles to tech: Manchester’s modern renaissance
The secret to Manchester’s success is often debated, but its ingredients can be traced back to one simple thing: Manchester City Council’s clarity and consistency of strategy on a number of levels.
Over the past 25 years, Manchester has been refocusing its economic base to become a post-industrial city no longer reliant on one or two key sectors.
The long-term economic strategy pursued by the council and its partners has sought to actively diversify the economy and play to its strengths in the science, creative and digital sectors. This approach has paid dividends with respect to employment, with growth in Manchester’s job market being consistent for more than a decade.
The council’s tack has provided a clear case for optimism for the city’s future: we have a growing skills base driven by graduate talent, significant increases in number of business start-ups, and major infrastructure investments planned.
Aligned with this long-term economic strategy has been the development and implementation of policies to promote a more diverse housing offer that meets the requirements of those who want to work and live in the city. This has been boosted by plans to strengthen transport connectivity across the conurbation and reduce reliance on cars, as well as create a cultural offering that matches the best global capitals.
Underscoring these plans have been clear ‘place-based’ strategies, with the adoption of strategic regeneration frameworks that have ensured complementary micro-locations are created. The council has sought to encourage high-quality office space, ensuring architecture considers the immediate environment with a clear vision and an eye for detail in terms of public realm.
All of this has helped to retain investor and developer confidence in the city.
What about the rise of working from home?
Flexible working is here to stay but does it mark the end of the office, the terminal decline of city centres and a significant downturn in the demand for new office floorplate? From where I sit, I think not.
Manchester’s abundance of talent, particularly young graduates wanting to live and work in the city centre, is still a major attractor to growth businesses putting down roots in the city.
The resultant huge employment market, coupled with the enduring appeal of our city as a place to live, will continue to act as a major magnet for businesses.
Adding to this dynamic, our October 2020 survey of Manchester businesses confirmed that constantly working from home was negatively impacting worker mental health. Over three-quarters of those surveyed felt safe working in a Covid-secure office. Plus, more than 80% of respondents thought remote working was having a negative impact on those being trained and mentored.
What can we expect now?
Over the next six months, schemes such as 11 York Street, Manchester Goods Yard, Circle Square, The Lincoln and the Globe & Simpson building are to be completed.
A slew of new schemes is due to start, including 9 First Street, Mayfield, new development at Noma, Back Turner Street and Pollard Street. The council’s proactive approach to enabling these developments to come forward over the past year has borne fruit, leaving a medium-term legacy to the market when these schemes are completed.
We should not overlook the benefits the area continues to secure from the Evergreen Fund, which was established nearly 10 years ago to provide debt for development projects that provide employment space.
Schemes such as Citylabs 1, 125 Deansgate, No 1 Spinningfields and the XYZ Building have all benefited from the fund. It continues to provide access to schemes that need development financing. Looking ahead, I can only encourage the council and the region to continue to expand these financial instruments, to help more opportunities be realised.
Manchester doesn’t stay still for long, and it looks to me to be no different this time around. I’m confident it can come back swinging, just like it has before.
- Will Lewis is founding director of OBI