Greater

Lambert Smith Hampton Issue One / 2010

Manchester
Office Market
Drivers for demand

Inside this edition:

» Manchester: the UK’s second city?
» MediaCityUK: is it sustainable in today’s economic climate?
» Greater Manchester office market overview
» Public display of affection
» The emergence of a new business district www.lsh.co.uk
Greater Manchester Office Market / Issue One / Manchester: the UK’s second city
Manchester: the UK’s second city
Having recently witnessed one of
the largest and most significant
development booms on record,
it would appear that Manchester
City Centre’s fortunes have been
transformed and its future as
the UK’s second city is well
and truly secured.
2 / Lambert Smith Hampton
Adorning the city’s skyline is an explosion of
new architectural structures, from the slick
and sophisticated Spinningfields to the
perfectly polished Piccadilly. These large-scale
mixed-use developments have injected the city
with an enviable supply of grade A office
space on a scale unlike anything ever seen
before outside of London. In doing so,
Manchester has been thrust onto national and
global shortlists for corporate requirements,
providing a major catalyst for a vibrant and
thriving economy.
Chart topping
With an average annual take-up of just under
one million sq ft*, Manchester has grown
significantly more than any of the other
‘big six’ cities in the UK outside of London,
topping the charts for the past five years
(see Chart 1).
* Calculated over a 10-year period
Fuelling this demand has been the proactive
nature of both the City Council and inward
investment company MIDAS, which have
worked tirelessly to promote Manchester
as a leading European business destination.
The growth of the region’s established
transport hubs, in particular Manchester
International Airport and Manchester
Piccadilly, has also created a gateway to a
much wider occupier audience. The former
providing direct flights to over 190
destinations, including 16 in the UK, and the
latter providing a high-speed rail service that
reaches London in a little over two hours.
The result? A significant rise in inward
investment from major public and private
sector occupiers whose business presence in
the City Centre is firmly established on long-
term leases.
 Greater Manchester Office Market / Issue One / Manchester: the UK’s second city

Risk and return Chart 1

Understandably, Manchester’s predominance ‘Big six’ average annual take-up

as the largest financial and professional
000 sq ft
services centre outside of London has left it 1,000
exposed to the downturn and demand has
been somewhat subdued as a consequence.
800
Final year take-up is expected to be down
almost 25 percent on the 10-year average.
600
Despite this rather dour prediction, the extent
of which Manchester’s annual take-up has
400
deviated from the 10-year average has been
marginal, indicating a comparatively stable
200
level of occupational demand compared to
the other ‘big six’ (see Chart 2).
0
Also vying for the prestigious accolade of Manchester Edinburgh Bristol Birmingham Leeds Glasgow

second city status is Birmingham. While it is Source: LSH Research

possible to draw similarities between the two,

Chart 2
with both having benefited from major
lettings to their respective city councils this ‘Big six’ take-up v 10-year average
year, Manchester unmistakably stands out % difference
from the crowd. 180

160
The commercial and administrative capital of 140
the north west is poised to record significantly
120
more activity during 2009 than its Midlands
100
counterpart (see Chart 3). No mean feat when
you consider the turmoil experienced in the 80

financial markets over the past year. 60

40
The future’s bright
20
Once at the heart of the Industrial Revolution,
0
Manchester has shed its traditional past to
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
become one of the top places in the UK to
Manchester Edinburgh Bristol Birmingham Leeds Glasgow
relocate a business. The main challenge going
forward will be to attract inward investment, Source: LSH Research

both domestically and internationally, in order

Chart 3
to maintain its unofficial title as the UK’s
‘Big six’ take-up 2000-2009
second city.
000 sq ft
1,400
Major investment programmes including the
expansion of the city’s two major universities, 1,200
the redevelopment of Victoria Station, and the
1,000
transformation of the iconic Metrolink tram
system are already underway. Projects such 800
as these will continue to change the face of
Manchester City Centre beyond recognition. 600

400
David Thwaites, Office Agency
Tel: +44 (0)161 242 8008 200

Email: dthwaites@lsh.co.uk
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Manchester Edinburgh Bristol Birmingham Leeds Glasgow

Source: LSH Research

Lambert Smith Hampton / 3

Greater Manchester Office Market / Issue One / MediaCityUK: is it sustainable in today’s economic climate?
MediaCityUK:
is it sustainable in today’s
economic climate?
The BBC’s relocation to MediaCityUK
in Salford Quays has polarised
opinion. Critics have slammed
it as an unnecessary waste of
license payers’ money, while
supporters believe it could be a
catalyst for economic growth.
As the first of the BBC’s three buildings
is handed over and an estimated 1,500
employees prepare to relocate from London,
with a further 800 from Manchester City
Centre, what does the future hold for
MediaCityUK?
In an economic climate which has seen most
new schemes delayed or even abandoned due
to funding and viability issues, the sheer
fortitude of developer, Peel Holdings, has
seen construction continue apace.
So much so that Phase One is still on target
for delivery in 2011. The first phase of
development incorporates 700,000 sq ft of
office space, a 250,000 sq ft state-of-the-art
studio block, 80,000 sq ft of retail and leisure
accommodation, 378 apartments and a 218-
bed hotel. In addition, a five acre public realm
area will be created, including a piazza
capable of holding upwards of 5,000 people.
The
development
itself is on a scale
unlike anything
witnessed in
recent years.
4 / Lambert Smith Hampton
Covering 36 acres of former dockland at
Salford Quays and occupying a prominent
waterfront position, Phase One represents
only one-fifth of the total land available for
redevelopment.
According to Peel, its aim is to bring together
a variety of hi-tech organisations, independent
producers, facilities providers and broadcasters
alongside the BBC to create the UK’s first purpose-
built media city. However, with office take-up
for the Quays at a record low and some media-
related occupiers questioning the need to
relocate from the City Centre of Manchester
to this new media hub, it is anticipated that
MediaCityUK will take longer than originally
planned to extend to the full 200 acres.
Encouragingly, the University of Salford has
recently signed an agreement to become the
development’s second anchor tenant
alongside the BBC. The University looks set to
lease 100,000 sq ft over four floors to create a
new higher education centre – a resounding
affirmation of its belief in the development in
its own right and not just as a media hub.
While it is difficult to predict what level of
activity MediaCityUK will see once Phase One
is fully delivered and the market has improved
somewhat, its success will ultimately
determine the progress of any further
expansion. The development will clearly entice
a wide range of occupiers and, upon the
BBC’s arrival, will have a real impact on the
local community and regional economy.
MediaCityUK should not be viewed in
isolation but as part of an outstanding piece
of regeneration. When pictured alongside the
award-winning Lowry Hotel, the Imperial War
Museum and the extensive residential
development, MediaCityUK is the catalyst for
this part of Manchester to become a success.
Adam Jackson, Office Agency
Tel: +44 (0)161 242 7065
Email: ajackson@lsh.co.uk
tistics Greater Manchester Office Market Statistics G
mber 2009 December 2009 December 2009 December 2009 December 2009 December 2009
Overview
The Greater Manchester office market saw a slowdown in overall
letting activity during 2009. Overall take-up figures in the three
sub-markets are predicted to reach just over 1.1 million sq ft by the
year end, 37 percent down on 2008 and 35 percent down on the
long-term average for the region as a whole.
The occupational market has shown a varied response to the weakening
economic conditions, with the public sector proving to be more robust.
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. A large proportion of the stock on the market
is of a high-quality, with a significant percentage either new build or
recently refurbished.
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.
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. However, with the lack of new development in the pipeline, net
effective rents are likely to increase in the latter half of 2010.
The investment market saw the first real signs that conditions are
improving since August 2007, with a number of transactions having
taken place during the year. It is too early to predict the end of the bear
market but these may be the initial steps towards the improvement in
fortunes that the investment market has been waiting for.
www.lsh.co.uk
Manchester City Centre

Executive summary
• Take-up will reach approximately
700,000 sq ft in 2009, down 30 percent
on the five-year average.
• Public sector-related organisations have
underpinned activity with NHS North
West taking 51,971 sq ft, representing
the largest City Centre office letting in
the year to date. This will be
overshadowed by Manchester City
Council taking 140,000 sq ft, which is
due to complete imminently.
• The unprecedented level of For more information, please contact:
development in recent years has Mark Bamber, Associate Director
resulted in approximately three years Tel: +44 (0)161 242 7077
supply being readily available. Email: mbamber@lsh.co.uk
However, new development activity is
severely restrained with no grade A
office buildings under construction
due to complete from 2010 onwards.
• Rents for high-quality refurbished
buildings have fallen from the peak of
£28.00 per sq ft as landlords competed
to attract occupiers, with an average
decline of approximately 20 percent.

Demand
• Activity to Q3 2009 is approximately
460,000 sq ft. Total annual take-up is
expected to reach 700,000 sq ft, down
almost 30 percent on the five-year average
of 990,000 sq ft, and nearly 25 percent on
• Grade A take-up has accounted for
Manchester City Centre office market
approximately 33 percent of total lettings take-up
in the year to date, roughly in line with
000 sq ft
previous years, although the deal to
Manchester City Council will see this 1,400

the 10-year average of 920,000 sq ft. figure rise to almost 50 percent.

1,200

• Occupier demand has been dominated by • Take-up of good-quality, refurbished space

1,000
the public sector with NHS North West taking (grade B+) has doubled from the five-year
51,971 sq ft at 3 Piccadilly Place, representing average of 15 percent to 30 percent, at the 800

the largest letting in the City Centre in the
year to date. Other notable public sector-
related lettings include 24,665 sq ft to the
National Institute of Clinical Excellence and
expense of poorer quality second-hand 600
space. This is as a consequence of a fall in
400
headline rents and an increase in incentives,
resulting in better quality space becoming 200

22,457 sq ft to The College of Law. This more affordable. 0

will be boosted further by the City Council’s 99 00 01 02 03 04 05 06 07 08 09
(forecast)

140,000 sq ft letting at First Street.

Supply
• 2008 saw a record 900,000 sq ft of grade
A accommodation released to the market.
Although this has fallen back in 2009,
a further 700,000 sq ft will have been
completed by the end of the year. This
• A significant amount of space has been
Manchester City Centre office market
released back into the market due to grade A availability
corporate relocations and downsizing. This
000 sq ft
includes 45,000 sq ft by Halliwells, 30,000
sq ft by Cobbetts, 32,000 sq ft by Gardiner 1,000

includes: First Street (180,000 sq ft); Media Group and 24,000 sq ft by HBOS. 900

Peninsular (148,000 sq ft); 1 New York 800

Street (110,000 sq ft) and Vantage Point 700

(53,000 sq ft). 600

500
• With the unprecedented level of development
400
within the City Centre over the past two
300
years, there is approximately 950,000 sq ft
200
of grade A accommodation available in the 100
market which, based upon historic take-up 0
2007 2008 2009
levels, represents approximately three years
supply.

Lambert Smith Hampton Research | 6

 Manchester City Centre

New development
• New development activity is severely
restrained and, with West Properties’
62,000 sq ft Origin and Property Alliance’s
73,000 sq ft Axis schemes both on hold,
there are currently no grade A office
• A number of significant sites in the City
Manchester City Centre office market
Centre are available for future development, grade A supply pipeline
including Greengate Embankment, Victoria
000 sq ft
Station, Granada, BBC’s Oxford Road
campus and the former Boddington’s 1,000

buildings under construction due to Brewery, which should prevent a shortage

800
complete from 2010 onwards. of available grade A space in the long-term.
• A number of schemes are in the pipeline,
600
including: Eider House, Piccadilly Basin
(87,500 sq ft); The Landmark, Oxford Road 400
(175,000 sq ft) and Elizabeth House, St
Peters Square (400,000 sq ft). With a 200
significant pre-let or upturn in the market,
construction could commence at a rapid 0
2008 2009 2010 2011
pace, quickly resulting in an influx of grade
A accommodation and satisfying any
currently unidentified demand.

Market rental values and yields

• Grade A headline rents have remained
relatively stable over the past 12 months
despite a weakened occupational demand.
• Rents for high-quality refurbished buildings
have fallen from the peak of £28.00 per sq
• The investment market experienced the
Manchester City Centre office market
most significant increase in activity since the net initial yields
end of 2007, rising by 44 percent to £5.8
% Yield
billion for the third quarter 2009. Yields on
UK offices, excluding central London, fell by 8

ft, with an average decline of approximately 68 basis points to 7.38 percent. This figure 7

20 percent. was reinforced by the recent sale of No 1

6
Balloon Street to a private family trust for
• Incentive packages have increased over the 5
£21 million, reflecting a net initial yield of
past year as landlords competed to attract 4
6.5 percent.
occupiers. However, convincing occupiers to
3
relocate still remains the biggest challenge
2
as they generally wish to retain flexibility
and are unwilling to outlay the large 1

associated costs. 0
2005 2006 2007 2008 2009

Forecast
• With a lack of grade A stock being
developed, the level of supply will fall over
the next 12-24 months and net effective
rents will rise as incentives harden.
However, some buildings will continue to
• The prime office areas will continue to
Manchester City Centre office market
expand as Piccadilly and Spinningfields grade A rental values forecast
will be joined by other traditionally ‘fringe’
£ per sq ft
locations such as Victoria Station.
29.0

struggle in attracting occupiers and we 28.5

anticipate these landlords will increase 28.0

incentive packages and reduce quoting 27.5

rentals, resulting in a two-tier market. 27.0

• Pressure will remain on refurbished 26.5

accommodation as more buildings are 26.0

released to the market when occupiers 25.5

move to new accommodation. 25.0

24.5
2005 2006 2007 2008 2009 2010 2011
(forecast) (forecast)

www.lsh.co.uk
South Manchester

Executive summary
• Occupational demand has significantly
decreased in 2009 with total take-up
likely to reach a 12-year low, in the
region of 400,000 sq ft. This is
approximately 35 percent down on
2008 owing to a shortage of large
leasehold transactions in excess of
20,000 sq ft.
• Up until Q3 2009 there were 115
transactions in comparison with 131
for the corresponding period in 2008.
The average transaction size has
significantly reduced from 4,000 sq ft
in 2008 to 2,500 sq ft in 2009.
• Freehold activity is relatively low in
comparison with recent years but still
accounted for 20 percent of the total
take-up in comparison with 12 percent
in 2008. This is mainly due to the
overall fall in take-up.
• The oversupply of business park office
stock, built in the early part of the
decade, has still not been adequately
absorbed. There is no significant
speculative office development
imminent within the region.
• Grade A rents have reduced in most
of the business parks but have
remained stable for the more affluent
town centre locations. The letting of
Lakeside 5,000 to Nike at £18.50 sq ft
signified the highest rent within the
region. In view of the oversupply,
market rents have decreased by as
much as 25 percent for some buildings.
• As with other regions the investment
market has suffered from low levels
of activity. The notable transaction for
2009 has been the sale of Lakeside
5,000 at Cheadle Royal which achieved
a yield of 7.5 percent.
For more information, please contact:
David Thwaites, Associate Director
Tel: +44 (0)161 242 8008
Email: dthwaites@lsh.co.uk

Demand
• Take-up in 2009 has been adversely affected
by the shortage of large transactions, with
only four deals taking place above 10,000
sq ft. The 37,456 sq ft letting to Nike of
Lakeside 5,000 at Cheadle Royal has been
sub-dividing accommodation to meet this
South Manchester office market
demand and offering flexible terms. take-up
• There are a number of large requirements
000 sq ft
currently in the market from the likes of
John Lewis, Edmundson Electrical and Nike 900

by far the largest transaction of the year. Golf. Should a sizeable proportion of these 800

• With several lettings imminent at ICO1, transactions be satisfied take-up for 2010 700

Didsbury Point, take-up is likely to approach should increase from the 2009 level. 600

400,000 sq ft by the year end. This is • The majority of activity has been centred 500

significantly lower than the five and 10-year around the region’s business parks, which 400

averages of 640,000 sq ft and 634,000 sq ft has accounted for four of the largest 300

respectively. leasehold transactions, with Cheadle Royal 200

• Demand remains strongest in the sub 5,000 Business Park featuring prominently. 100

sq ft sector which accounts for over 85 0

00 01 02 03 04 05 06 07 08 09
percent of all transactions. Landlords are (forecast)
Leasehold Freehold
becoming increasingly pragmatic in

Supply
• Approximately one-quarter (22.5 percent)
of all available office stock within the region
is grade A space, the majority of which is
situated within a business park environment.
• Total availability at Q3 2009 stood at
• Poor take-up in 2009, coupled with an
South Manchester office market
increasing number of occupiers downsizing availability
operations, has led to an increase in the
000 sq ft
availability of refurbished stock from 1.2
million sq ft in 2008 to 1.4 million sq ft 2,500

approximately 1.8 million sq ft, which is in 2009.

slightly less than the 1.85 million sq ft for
the corresponding period in 2008.
• The lack of large-scale grade A development
in the past 18 months has led to a reduction
in the grade A supply from 30.36 percent in
2008 to 22.5 percent in 2009.
2,000
• The total office availability represents
approximately 4.5 years supply based
1,500
on the take-up forecast for 2009. This is
reduced to 2.8 years when compared with
1,000
the five-year average take-up figure.
500

0
2005 2006 2007 2008 2009

Total Grade A Grade B+ Grade B/C

Lambert Smith Hampton Research | 8

 South Manchester

New development

• Significant development activity, which has
been completed in 2009 has been limited
to No 1 Kings Close, Wilmslow (10,000 sq ft)
and BAM’s St Peters Square development in
Stockport (52,000 sq ft).
• In view of the continued oversupply within
the region and lack of significant corporate
activity, there is no speculative development
• The 180,000 sq ft Micromass requirement, South Manchester office market
which is due to be satisfied before 2012, is speculative construction
the region’s largest corporate requirement 000 sq ft
that can only be accommodated by new
250
build development. A decision on the
preferred location is likely to be made
200
by Q1 2010.
150

imminent in 2010 and beyond. Most of the

recent new supply coming to the market 100

has resulted from refurbishments rather

than new build schemes. 50

0
2005 2006 2007 2008 2009

Market rental values and yields

• Prime headline rents have remained in the
region of £18.50 per sq ft for a number of
years due to the slow absorption rate of the
region’s business park offices. Higher rents
have been achieved in affluent towns such
• Tenant incentive packages have increased
South Manchester office market
over the past nine months as landlords have net initial yields
been increasingly keen to avoid the running
% Yield
costs involved with vacant buildings, in
particular empty property rates. This has 8

as Wilmslow and Altrincham; however, had the effect of significantly reducing 7

these are invariably small transactions on net effective rents.
6
flexible lease terms. • There has been a limited amount of
5
• The letting to Nike achieved the prime investment activity throughout the region.
4
headline rent of £18.50 per sq ft; however, The recent sale of Lakeside 5,000 achieved
3
a number of buildings that have stood a yield of 7.5 percent and generated much
empty for some time have significantly interest. There are encouraging signs that 2

reduced quoting rents in order to investors are returning to the market, which 1

achieve lettings. may signal a yield shift in 2010. 0

2005 2006 2007 2008 2009

Forecast
• The downward pressure on prime headline
South Manchester office market
rents is expected to continue for the majority prime rental values forecast
of 2010. However, with an improving
£ per sq ft
economy and reduction in supply we
should see signs of rental growth in 2011. 20.5

• With the letting of Lakeside 5,000 and the 19.5

likely absorption of a number of other 18.5

office buildings in the next few months,
17.5
net effective rents for business park stock
16.5
should begin to increase by the end of 2010.
15.5

14.5

13.5

12.5
2005 2006 2007 2008 2009 2010 2011
(forecast) (forecast)

www.lsh.co.uk
Salford Quays

Executive summary
• Take-up to the end of Q3 2009
amounted to just 21,616 sq ft. It is
anticipated that the total for the year
will be the lowest recorded for 10
years. The average transaction size
equated to just over 2,000 sq ft with
no freehold activity.
• The Salford Quays market remains
oversupplied, with accommodation
available for immediate occupation
standing at 431,743 sq ft, representing
just under three years supply based on
the five-year average take-up figure.
• As economic conditions improve For more information, please contact:
and occupier demand returns, it is Adam Jackson, Senior Surveyor
anticipated that the oversupply will Tel: +44 (0)161 242 7065
be reduced over a relatively short Email: ajackson@lsh.co.uk
period of time as no significant
speculative development is planned.
• The development of Peel’s MediaCityUK
continues with Phase One equating
to 36 acres out of a possible 200 acres.
However, the ultimate success of
MediaCityUK will take a number
of years to be achieved.

Demand
• Take-up to Q3 2009 amounted to 21,616
sq ft, which was completed in nine separate
transactions. With the deal to Balfour
Beatty imminent, take-up is likely to reach
39,000 sq ft by the year end, well below
Life. A further 13,000 sq ft is under offer
Salford Quays ofice market take-up
at the Soap Works; the former Colgate
Palmolive site being developed by Abstract
000 sq ft
NIKAL and Carlyle. If these deals complete
in the final quarter of 2009, take-up could 450

the five and 10-year averages of 160,327 near the level seen in 1999 of just over 400
sq ft and 143,661 sq ft respectively. 58,000 sq ft. 350

• All of the transactions were sub 6,000 sq ft, • It should be noted that over 100,000 sq ft 300

with the average deal equating to 2,065 sq ft. has been transacted at Peel’s MediaCityUK 250

Of these deals, 70 percent occurred in the by way of an agreement to lease by 200

grade B+ sector reflecting the dominant University of Salford. The University will 150
supply of this grade of space in the Quays. take occupation of the accommodation in 100

• A further 17,115 sq ft is under offer at the autumn of 2011 and the space will be 50

The Lighthouse, where Balfour Beatty is used predominantly for educational

0

in negotiations to take the whole of the purposes with an element of office use. 99 00 01 02 03 04 05 06 07 08 09
(forecast)

second floor on a new lease from Standard

Supply
• Significant oversupply exists within the
market with the Q3 figure equating to
431,743 sq ft or just under three years
supply based on the five-year average take-
up figure. At 72,557 sq ft, BAM’s Metro
• A further 35,457 sq ft has been developed
Salford Quays office market availability
at Digital Park in seven two-storey self-
contained buildings. Originally developed
000 sq ft
by Peel and completed in December 2008,
the units have failed to secure occupiers on 500

development makes up 16 percent of this either a leasehold or freehold basis due to 450

total supply. This property remains empty weak occupier demand. 400

in its entirety despite completing in 2007. • The construction of Peel’s MediaCityUK

350

300
• Orbit Developments’ Broadway Quays continues with the development of 36 acres
250
provides 21,411 sq ft of grade A office forming Phase One of the scheme which
200
accommodation. A further 39,641 sq ft will deliver 700,000 sq ft of office
150
can be delivered with relative ease as the accommodation across five buildings. In 100
substructure of Curzon House has been 2006 300,000 sq ft was pre-let to the BBC 50
completed. and Building C, the first of three buildings 0
2005 2006 2007 2008 2009
to be developed for the BBC, was handed
Grade A Grade B+ Grade B/C
over in October 2009. Buildings A and B
will be handed over in early 2010.

Lambert Smith Hampton Research | 10

 Salford Quays

New development
• Peel’s Digital Park and MediaCityUK have
Salford Quays office market speculative
represented the only recent and continuing construction
development in the Quays. With excess
000 sq ft
supply and weak occupier demand we
do not foresee any new speculative 150

development.
120
• The substructure of Orbit Developments’
Curzon House has been completed. This
90
could provide the market with an additional
39,641 sq ft of grade A accommodation
60
relatively quickly, thereby satisfying any
currently unidentified demand.
30

0
2005 2006 2007 2008 2009

Market rental values and yields

• Prime headline quoting rents have remained and the increased burden of the empty
static at £21.50 per sq ft at BAM’s Metro, property rates liability.
while The Lighthouse commands a quoting • A large proportion of the office stock
rent of £20.00 per sq ft, reduced from the at Salford Quays is owned by developer-
former figure of £21.50 per sq ft. It is investors as opposed to developer-traders
understood that the deal to Balfour Beatty and therefore very little yield evidence exists.
at The Lighthouse will be at a more
competitive level.
• Peel’s grade B+ accommodation at The
Victoria and Quay West have secured
lettings at rents of £18.50 per sq ft and
£15.50 per sq ft respectively. Despite these
headline rents, rent-free incentive packages
have increased over the last 12 months in
response to weakening occupier demand

Forecast
• The continuing development of
MediaCityUK and the subsequent move
of the BBC to Salford Quays in 2011 will
provide a welcome boost to a market that
is likely to record its worst take-up figures
with the Soap Works will provide the
Salford Quays office market prime rental
market with an alternative, less conventional values forecast
style of occupation when compared to the
£ per sq ft
large levels of grade B+ stock.
• It is anticipated that the greatest headline 20.5

in 10 years by the end of 2009. rents will remain in the region of £18.50
20.0
• The extent of development within per sq ft while occupier demand remains
MediaCityUK remains to be seen as weak and those landlords that look to cover 19.5

the success of Phase One will be closely voids with immediate effect maintain
19.0
monitored by non-media related occupiers flexible dealing positions. Those landlords
looking to benefit from new build that seek rents in the region of £20.00 per 18.5

waterfront office accommodation. sq ft may well succeed from 2010 onwards

18.0
• As economic conditions improve we but only if occupier demand significantly
anticipate the current oversupply within the improves. However, based on current 17.5
2005 2006 2007 2008 2009 2010 2011
Quays to fall in the absence of any planned conditions limited growth is expected (forecast) (forecast)

significant speculative development. The over the next 24 months.

redevelopment of the former Colgate site

www.lsh.co.uk
No. 1 Kings Close, Wilmslow

Public display of affection
The public sector, once disparaged by many in the commercial property
industry, is driving activity through the very heart of the UK’s economy,
creating valuable jobs and generating long-term stability.
Despite being renowned as the largest business
and financial services centre outside of
London, Greater Manchester has witnessed an
increasing diversification of its occupier profile.
A wide range of public sector occupiers have
helped maintain momentum during 2009 by
accounting for a significant proportion of the
total office take-up across Greater Manchester.
The most notable transactions being the pre-
sale of 240,000 sq ft at Central Park to the
Greater Manchester Police Force, Manchester
City Council’s short-term letting of 140,000
sq ft at First Street and NHS North West’s
acquisition of 52,000 sq ft at Piccadilly Place.
Add to this reports that the Equality and Human
Rights Commission is expected to acquire
40,000 sq ft at Piccadilly Place, together
with a live requirement for 20,000 sq ft from
the Learning Skills Council, and it is clear that
the public sector has become a vital force in
the market.
Greater Manchester Office Market / Issue One / Public display of affection
With its profusion of high-quality office
accommodation and excellent rail links to
London, Piccadilly is fast emerging as the
public sector’s location of choice, housing
major organisations such as GMPTE, HM
Revenue and Customs, Government Office
for the North West, Highways Agency and,
more recently, NHS North West.
Plans to create a ‘Whitehall of the North’ on
the site of the nearby Mayfield Street Station
could deliver a further 5,000 public sector
jobs. With many recent deals incorporating
five-year break options, occupiers will be able
to relocate to the new complex when it is
completed in 2015. Therefore the site has the
potential to become the biggest super-campus
of civil servants in the UK.
While this is an enormous opportunity for
Greater Manchester, the notion of a single
hub for all government-led relocations
inextricably affects the rest of the market.
Certain developers have questioned its
3 Piccadilly Place, Manchester
wisdom, as they will now have to assume that
no other space will be let or sold to the public
sector. This may limit future development
across the city.
One saving grace is that not all public sector
bodies need or even want to site themselves
in a central hub. Meanwhile, certain occupiers,
who wish to be associated with government,
will undoubtedly opt for premises within close
proximity of the new facilities.
While 2009 has brought about an acceleration
of government-led relocations, developers
must remain vigilant against reliance on the
public sector given that public finances have
been severely strained by the need to support
the ailing financial sector. Added to which, the
widely anticipated cuts in public expenditure
following the general election in 2010 may
result in a reduction in future demand.
Mark Bamber, Office Agency
Tel: +44 (0)161 242 7077
Email: mbamber@lsh.co.uk
Lambert Smith Hampton / 13
Greater Manchester Office Market / Issue One / The emergence of a new business district
Reports of the emergence of a
new business district may be
fanciful but, if north Manchester’s
recent surge in high-quality
development is anything to go
by, perhaps the notion isn’t so
remote after all.
14 / Lambert Smith Hampton
The emergence of a
new business district
Greater Manchester’s office market has
traditionally been dominated by three distinct
regions; Manchester City Centre, South
Manchester and Salford Quays. However,
development activity has become much more
dispersed in recent years, giving rise to
reinvigorated suburban office markets and
heralding a new outlook for the northern
crescent towns of Bolton, Bury, Oldham
and Rochdale.
Major developments such as Kings Point in
Oldham, Middlebrook Business Park and 120
Bark Street in Bolton have been completed,
while others such as Central Park in east
Manchester are still underway. The
fundamental result is a much-needed injection
of grade A office space, which has helped
the region to land several large corporate
requirements from the likes of Fujitsu, EON,
AXA and, more recently, Greater Manchester
Police Force.
Ask:Goodman’s 1.4 million sq ft Central Park
has been an early success, having played host
to the UK’s largest office transaction of 2009.
Recognising the benefits of the scheme with
its high-quality specification and superb
 Greater Manchester Office Market / Issue One / The emergence of a new business district
transport links, including its own Metrolink
station, Greater Manchester Police Force is
scheduled to relocate more than 1,000 staff
from its existing offices at Chester House, Old
Trafford, to the 240,000 sq ft building when it
completes in 2011.
Then there is Middlebrook, one of the largest
integrated and sustainable mixed-use
developments in the country. The decision by
the developer, Orbit, to speculatively build
a further 50,000 sq ft office building at its
Parklands scheme clearly demonstrates
confidence in a product that is all too rare
in the current economic climate.
Another important stimulus is the investment
in the region’s transport infrastructure. With
the completion of the M60 orbital motorway
in 2000 and the planned extension of the
Metrolink to Oldham and Rochdale in early
Greater Manchester Police Force HQ, Central Park
2011, Greater Manchester’s northernmost
towns will become more accessible than
ever before.
North Manchester may not be able to
compete on reputation alone. However,
with its promise of flexible, value for money
accommodation and improving transport
connections, it has the ability to appeal to Another
a number of footloose businesses as well as important
those establishing operations in the region.
stimulus is the
As occupational costs continue to form an
important driver of activity, it will be
investment in the
interesting to see how the area performs region’s transport
over the coming months in comparison to
its more ‘established’ sister locations.
infrastructure.
Mark Bamber, Office Agency
Tel: +44 (0)161 242 7077
Email: mbamber@lsh.co.uk
Lambert Smith Hampton / 15
Our National Office Network

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Greater Manchester Office Agency contacts

Head of Office City Centre South Manchester Salford Quays
Peter Skelton Mark Bamber David Thwaites Adam Jackson
Tel: +44 (0)161 242 7005 Tel: +44 (0)161 242 7077 Tel: +44 (0)161 242 8008 Tel: +44 (0)161 242 7065
Email: pskelton@lsh.co.uk Email: mbamber@lsh.co.uk Email: dthwaites@lsh.co.uk Email: ajackson@lsh.co.uk

Details of other Lambert Smith Hampton research material can be viewed on our website at http://www.lsh.co.uk
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© Lambert Smith Hampton December 2009. Regulated by RICS

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