Knight Frank has provided appraisals of the office markets in Manchester and Liverpool in the first quarter of 2013.
The property consultancy's Regional Office Market Profile states that take-up in Manchester got off to a healthy start in 2013, amounting to 274,000 sq ft in Q1 – against a quarterly average of 197,066 sq ft for 2012, albeit down 7.8% on Q4 2012.
Prime headline rents stood at £30 per sq ft, unchanged over the quarter and net effective rents were also unchanged at £23.50 per sq ft.
The availability of grade A space remained at 370,000 sq ft over the quarter. This means that availability is now more than 13% down on Q1 2012.
The vacancy rate has edged down to reach 11.2% in March. This compares favourably with other regional cities, some of which have vacancy rates of 12-16%.
Active requirements also remained at 700,000 sq ft during Q1, 55% up on a year ago.
The Manchester market has seen six deals of over 10,000 sq ft so far in 2013 and the average deal size during the first quarter is just under 5,000 sq ft.
Notable transactions during the first quarter included Travel Jigsaw taking 63,000 sq ft at Sunlight House, Worldpay's acquisition of 22,000 sq ft at 3 Hardman Square and DWF taking 15,000 sq ft at 201 Deansgate.
In the investment market, the Co-operative sold its One Angel Square head office for £142m.
RREEF Real Estate, has taken a 51% stake, with Gingko Tree Investment taking the remaining 49%.
"Due to the funding climate, appetite for speculative development remains thin and construction of new space in the city will be led by pre-letting activity," Knight Frank's report states.
"The continued erosion of Grade A stock is forcing any requirements of meaningful size to consider design & build pre-let.
"With the limited development pipeline, Grade A supply will continue to be steadily eroded.
"Consequently, there is potential that incentives on prime stock will harden throughout 2013."
In Liverpool, Knight Frank states that Q1 of 2013 was less active than Q4 2012, with take-up declining to 35,000 sq ft – 65% down on the Q4 figure and 42% down on a year ago.
Activity continues to be dominated by smaller enquiries.
Headline rents remained at £20 per sq ft in Q1, with net effective rents also unchanged on Q4 at £15 per sq ft.
Named active requirements increased slightly to 275,000 sq ft in Q1 and availability of Grade A space decreased marginally to 212,000 sq ft. down 9.8% on a year ago.
Vacancy rate remained stable at 15.0% in Q1.
Knight Frank say there was very little transactional activity during the first quarter and the majority of the total take up is accounted for the letting of 28,000 sq ft by Bank of New York Mellon at the Royal Liver building.
Nonetheless, Q1 saw some larger active requirements come to the market, despite majority of the demand continues to be focused in the sub-2,500 sq ft bracket.
Some of the notable requirements include DLA who are seeking up to 30,000 sq ft, an unnamed Government Department seeking up to 40,000 sq ft and SDV, who are looking for 8,500 sq ft.
"Appetite for traditional speculative development remains non-existent, although interest in Business Premises Renovation Allowance led requirements should soon see the refurbishment of some of the city's obsolete stock being brought back into use," states Knight Frank's report.
"As a result, we are expecting a strong start to Q2 with the commencement of some speculative refurbishment.
"Leasing activity is expected to remain flat, with the market remaining in favour of tenants, while landlords continue to compete aggressively. "Rents are expected to remain broadly unchanged for the first half of 2013 and incentives should remain at current levels."