Separate acquisitions by Warrington Council and Pictet Alternative contributed to £325m of deals recorded in the city’s office market last year, more than any other major UK city outside London, according to consultancy Avison Young.
In November, property investor Helical sold its Powerhouse Portfolio, comprising three Manchester office assets, to Pictet Alternative for £119m, while a month earlier, Warrington Council agreed to forward fund BT’s North West headquarters at English Cities Fund’s New Bailey to the tune of £112m, as revealed by Place North West.
Those two deals were the largest in terms of value of office sales transactions outside London in 2020 and helped Manchester record £235m of deals in the final quarter of a turbulent year, Avison Young’s Big Nine Q4 2020 report found.
The next biggest deal within the consultancy’s Big Nine list of the biggest UK cities outside London came in August, when Oval Real Estate acquired 1 Colmore Square in Birmingham from Legal & General for £87m.
In Liverpool, £25m of investment deals were signed in the last three months of 2020, slightly higher than the city’s quarterly average, according to the report.
Investment volumes across the Big Nine totalled £580m during the final quarter of 2020, up slightly on the 10-year average but down £60m year-on-year, Avison Young added.
Meanwhile, the effects of Covid-19 and associated lockdowns are still being felt in the office lettings market, with take-up in Q2 and Q3 2020 particularly hard hit, according to the report.
In total, occupiers signed to lease 800,000 sq ft of office space in Manchester city centre last year, significantly down on 2019, when 1.5m sq ft was transacted.
While the market remains relatively subdued at present, activity is expected to increase in the coming months, according to Mark Williams, principal and managing director of regional investment at Avison Young.
Mark Cooke, associate director at Avison Young added: “Before the latest national lockdown came into place, we were beginning to see people slowly returning to their office spaces and we expect this to continue when restrictions ease again.
“We’re still seeing activity and interest in space at the smaller and larger end of the market, but it’s the flight to quality that is still a major factor in letting and investment decisions.”
The shift in emphasis towards flexible working accelerated by the pandemic presents an opportunity for the suburban office market, Cooke added.
“The office market certainly isn’t dead, but as we look ahead, we expect to see more emphasis on ’15-minute neighbourhoods’, as many want to cut back on the commute and have their workspace within walking distance of their homes.
“As the city’s recovery will put a greater emphasis on the demand for talent, companies may want to consider where their employees are coming from in order to better facilitate a work-life balance.”
Avison Young’s Big Nine reports cover Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Liverpool, Manchester and Newcastle.