Greater Manchester's office market is poised to emerge from the global recession quicker and stronger than before, according Lambert Smith Hampton.
LSH's annual Greater Manchester office market review saw a slowdown in activity during 2009 and predicts that overall take-up in Manchester city centre, south Manchester and Salford Quays will reach just over 1.1m sq ft by the year end, which is 37% down on 2008 and 35% down on the long-term average for the region as a whole.
Peter Skelton, head of Lambert Smith Hampton's Manchester office, said: "The occupational market has shown a varied response to the weakening economic conditions, with the public sector proving to be more robust."
LSH said the future supply side is currently in balance, with approximately three years supply based on average take-up figures. However, certain locations across Greater Manchester have more pressing supply concerns than others. In its report, LSH said a large proportion of the stock on the market is of a high-quality, with a significant percentage either new build or recently refurbished.
Skelton added: "Occupiers will inevitably continue to release some secondary stock, while upgrading where lease events allow. There is also evidence of some sector consolidation. However, with little to no new development underway, there will not be a problem with oversupply."
"With supply far outstripping demand, landlords have become increasingly pragmatic in their approach towards securing occupiers."
LSH also said tenant incentive packages have increased with the effect of significantly reducing net effective rents across most of Greater Manchester, and this downward pressure is expected to continue through to the early part of 2010.
In the report, it said rents for high quality refurbished buildings in Manchester city centre have fallen from the peak of £28/sq ft as landlords competed to attract occupiers, with an average decline of approximately 20%. In south Manchester, LSH said prime headline rents have remained in the region of £18.50/sq ft for a number of years due to the slow absorption rate of the region's business park offices.
In Salford Quays, LSH said prime headline quoting rents have remained static at £21.50/ sq ft at BAM's Metro, while The Lighthouse commands a quoting rent of £20/sq ft, reduced from the former figure of £21.50/ sq ft. LSH understood that the deal to Balfour Beatty at The Lighthouse will be at a more competitive level.
LSH concluded that with the lack of new development in the pipeline, net effective rents are likely to increase in the latter half of 2010.