Following a prolonged period of healthy take-up, Manchester's office market is running extremely low on Grade A supply. As a result, demand for refurbished office space has never been stronger as occupiers and landlords look to 'plug the gap'. Grade B has accounted for an average of 62 per cent of the city's take up over the last 10 years and we expect the proportion to be even higher in 2016.

While we have experienced growing demand for Grade A space over the last three years, Manchester's annual take-up has consistently been underpinned by larger Grade B occupiers seeking to balance high-quality offices with value for money. As a result, the current planned refurbishment pipeline of 625,000 sq ft (58,063 sq m) is likely to last a little over two years. Increased competition for space is already driving secondary rents upwards, for example at Acresfield in St Ann’s Square (pictured above) where rents have moved from £16.50 per sq ft (£178 per sq m) to £18.50 per sq ft (£199 per sq m) in just over 12 months.

In terms of occupiers, much has been made of the TMT sector as a rising star and it has indeed grown significantly, taking more Grade B space in Manchester than any other sector over the last five years with deals totalling 710,889 sq ft (66,042 sq m). However, the term TMT encompasses such a breadth of occupiers that it is perhaps more accurate to think of the growth of ‘new’ occupiers, namely those seeking to capitalise on technology developments and new media. Many operate within long-standing sectors such as finance and insurance but are now seeking more creative workspaces. The challenge for landlords and designers, given recent inflation in the cost of construction materials and labour, is to create these workplaces at a commercially viable cost for such businesses which often have immature financial covenants and need shorter term leases to allow them to grow.

This year’s winners will undoubtedly be landlords who can deliver space to the market quickly and therefore capitalise on the current under supply across all sectors. Opportunities for large-scale occupiers within the Grade B market are very limited and with continued growth forecasted for the financial tech sector in particular, buildings which can provide flexible and interesting workspaces will succeed. However, solid fundamentals remain key and large floor plates in accessible locations will also continue to perform very well.

Further information

Contact Savills Office & Business Space