Manchester's office rent levels have held up well despite total take-up being the lowest since 2002, according to a report by consultancy Drivers Jonas.
The report said during the twelve months of 2009 prime quoted rents were currently at £28.50/sq ft, down just 50p from a year ago. However, rent-free periods increased substantially during the year to 30 months based on a ten year lease term with no break.
Drivers Jonas' UK Key Cities 2010 office trends report said take-up totalled 809,000 sq ft, which consisted predominantly of smaller requirements, around 5,000 sq ft or less, for Manchester city centre.
Drivers Jonas said a limited availability of stock had caused a lack of investment opportunities in 2009 and investors generally preferred city centre locations to business parks. The report said office deals totalled just over £147m in 2009, down 46% year-on-year and amounting to just 20% of the 2007 investment volume.
However, out of the six key cities the report covers, it said only Manchester and Birmingham will see the delivery of any new office space this year.
Although 250,000 sq ft of new office space will be delivered to the Manchester market in 2010, the report said it is the lowest annual delivery since 2005.
Drivers Jonas has forecast occupier demand in 2010 be driven by media firms, which it said will take advantage of the increased exposure of Media City UK in Salford.
One particular company highlighted by Drivers Jonas was commercial television channel ITV, saying it is in discussions over two potential sites to accommodate its 45,000 sq ft office requirement and 6-acre set for its soap opera Coronation Street.
According to Drivers Jonas research, it expects that over the next twelve months there will be a slight decline in rents as demand is put on hold and new stock is delivered to the market. Rent-free periods are forecast to remain stable to a maximum of 30 months on a ten-year lease term.
The report said prime yields in the Manchester office market will continue to harden during 2010 and it forecasts yields to reach 6% this year. Yields at the end of 2009 stood at 6.25%.
The Drivers Jonas office trends report reviews cities including London, Birmingham, Leeds, Edinburgh, and Glasgow, as well as Manchester.