A glut of new office space in Manchester city centre coupled with the economic gloom will result in rents remaining static on new and second-hand properties this year, according to a new report by Lambert Smith Hampton.
LSH Research's National Office Report 2008 says five regional cities – Manchester, along with Leeds, Glasgow, Birmingham and Bristol – will account for 4m sq ft, or 53% of the national total, of new speculative space coming to market in 2008.
However, despite these figures, the report does not predict a return to the days of 1990s- style over-supply and LSH believes the effects of the credit crunch will be mitigated by consented schemes being put on hold. The removal of the empty rates relief will also call a halt to many new construction starts in the next 18 months as developers become more discerning about which schemes to initiate. The report forecasts that the market will begin to absorb the over-supply as demand strengthens from 2010 onwards when the economy will begin to emerge from this slow phase of the cycle.
Peter Skelton, head of LSH Manchester, added: "Take-up in Manchester city centre last year was the second highest on record and figures for the first quarter of 2008 were very healthy, in excess of 250,000 sq ft. There are a number of sizeable requirements circulating in Manchester at the moment and we believe the commercial property market here looks set for another good year.
"One of the secrets to Manchester's success is the wide diversity of choice on offer, which benefits the whole of the city. Even in the current economic downturn, there is no doubt there are still areas of opportunity for developers and investors alike."
LSH said In terms of location, Spinningfields remained an important focus but significant deals have been completed elsewhere in the city too. Piccadilly and the traditional core also offer good business locations while a number of other opportunities are now emerging. These include Ask's scheme at First Street and Greengate and Muse's redevelopment of Victoria Station, together with the Co-op portfolio close by, which may be vacated, following the Co-op's search for a new HQ.