The South Manchester office market has seen improved levels of activity compared to 2007, with smaller transactions dominating and driving the market, according to Lambert Smith Hampton.
South Manchester has seen 461,000 sq ft taken up in the first nine months of 2008. LSH forecasts 600,000 sq ft will be let by the year-end, compared to 555,000 sq ft for 2007.
However, the traditionally strong freehold market in South Manchester has collapsed since Q3 2007, both with investors and owner-occupiers. Freehold deals accounted for 13% of take-up in 2008, down from 23% in 2007 and 38% in 2006.
Over three quarters of all transactions within 2008 have been within the sub 5,000 sq ft market, with high levels of activity within the local authority sector. Larger transactions are still rare, with only the sale of the Pipex Building at Christiefields to Healthsure and the pre-let to Cussons at Manchester Business Park exceeding 30,000 sq ft.
With a total availability of approximately 1.78m sq ft, there has been limited large-scale development over the last 12 months, LSH said.
The report said: "Given the current downturn in the market, this is unlikely to change in the short-term, particularly in respect of speculative development. Rok Developments, for example, had commenced on site at Wilmslow Business Park but have now put any development on hold. There are, however, exceptions with notable developments due to be delivered in the last quarter of 2008 including Muse's Oakfield 3 scheme at Cheadle Royal, UK Land & Property's development of Ashbrook at Heald Green and BAM Properties' building in Stockport."
Rental values in South Manchester remain static, with headline rents for Grade A space speaking around £18.50/sq ft.