Manchester is home to some of the UK’s most exciting, fast-growing tech, creative and digital companies. Recognised as one of the key hubs for these innovative sectors, Manchester has seen the highest level of tech take-up of office space of the regional office markets over the past five years.

As exciting, innovative businesses move to Manchester the need grows for exciting, innovative workspaces for them to occupy. The city’s ability to retain skilled talent depends on providing affordably priced, well-designed homes for those workers to live in. This article explores how the nature of demand for workspace and homes will change as Manchester’s workforce evolves and identifies what developers can do differently to meet this demand.

Where does the demand come from?

Manchester is a hub for new start-ups. The city saw a staggering 90.5% increase in new businesses from 2010 to 2018.

The digital & creative sector has driven much of this growth. Manchester has seen the highest level of tech take-up in the regional office markets over the past ten years and it was the single fastest-growing sector in Greater Manchester between 2010 and 2019, growing by 244%, accounting for almost a quarter of office take-up. More than 55,000 people work in over 9,000 businesses in Greater Manchester. More than 90% of these are small businesses, employing fewer than 10 people.

Manchester has a lot to offer these start-ups. Housing and commercial space are far cheaper than in London. The city enjoys the highest graduate retention rate outside London, capturing 60% of leavers from its four universities. Businesses often cite a lack of skilled workers as a barrier to growth. With so many graduates staying in the area, Manchester can provide those businesses with the skilled employees they need. It’s no wonder tech companies are choosing to relocate or to expand within the city.

Oxford Economics predicts an additional 30,000 people will join Manchester’s digital & creative workforce over the next 15 years. Supporting this sector will be key to Manchester retaining its competitive edge in the coming years. Providing an engaging, comfortable working environment is becoming a key weapon in the battle for tech and creative talent. Spaces that help occupiers attract the cream of the workforce will attract premium rents.

Mad for Manchester – what the city has to offer different types of occupier

Start-ups

Strategies to attract talent to Manchester must cater to the needs of the innovation economy, which is dominated by start-ups and freelancers. The city has unveiled many co-working spaces in recent years targeting young, footloose professionals. It has also invested in business incubators that allow budding companies to grow. For example, The Sharp Project on Thorp Road houses more than 60 digital start-ups across 200,000 sq ft of space in converted shipping containers. Clockwork, in Bishopsgate, offers flexible workspace and meeting rooms charged by the minute so occupiers only pay for the time they really need.

Scale-ups

As start-ups become more established and start hiring more employees their workspace needs to evolve. While they still need flexibility to accommodate rapid growth, they also value having dedicated space of their own, which they can design and lay out to match their emerging brand identities. One such space is The Landing in MediaCity, a resident tech hub for Manchester scale-ups. Its five floors are home to more than 120 small businesses working across sectors such as 5G, 3D printing, and augmented reality.

Scale-up businesses seeking funding often turn to venture capital (VC) firms. They not only provide capital but also strategic assistance, introductions to potential customers, partners, and experienced staff. Companies based in Manchester raised £138 million in capital in the first 10 months of 2020, despite Covid-19 disruption. This 10-month figure already represents a 58% increase on the five-year annual average.

Firms typically use the capital they raise to recruit more employees, leading to greater requirements for office space. These scale-ups need a place to do great work as they continue to expand, and Manchester needs to ensure it has the right offering to keep these growing businesses within the city. Office offerings such as Bruntwood SciTech’s Circle Square development will be a key location for this sector to develop and expand going forward. 2020 has already seen deals signed to scale-up occupiers such as Northcoders, as well as established employers such as Accenture, HPE and Hilti.

Established businesses

As firms become more established their office space requirements change less dramatically. However, Covid-19 has changed the way many occupiers will use their office space.

As we discussed in our earlier article on Manchester’s suburbs, the pandemic has forced many people to work from home. There’s only so much an employee can do from the study or from the kitchen table, however.

Earlier this year, the Savills Office FiT survey showed that while many employees felt they could focus and meet deadlines working from home, the office was far better for vital collaborative activities. People prefer to network, manage their teams, and work cooperatively with colleagues in person than over video calls. Survey respondents said it was easier to support their employees’ professional development in an office environment. Offices’ fit-out will therefore need to change to reflect their changing role, with more collaborative and meeting spaces and fewer desks. A higher-quality environment will be critical in ensuring productivity and occupancy return to pre-Covid levels.

Office developers need to consider how to accommodate all these types of occupier when delivering larger schemes. Buildings that incorporate flexible workspace for start-ups, accelerator space for scale-ups and more conventional Grade A space will attract a range of occupier types and provide a robust, diversified income stream.

A place to lay one’s head

Attracting and retaining talent in Manchester will take more than just exciting workspaces. Highly skilled, innovative employees need affordably priced, well-designed homes in which to live.

The types of home delivered in Manchester must reflect the types of household the city needs to attract. Many of these households will be younger; they will have relatively high incomes but have yet to accumulate much in savings. Homes built specifically for the private rental market, or Build to Rent, offer the convenience and quality of housing these households need in locations they want to be. Angel Gardens in NOMA and Deansgate Square are good examples, offering amenities such as a concierge, gym, pool and rooftop terrace.

Our demographic analysis shows that Manchester city centre attracts more affluent renters than the surrounding areas. The median household income for renters moving into Manchester city centre was £49,950 in 2019, 58% higher than the average for renters moving to within the M60 circular.

The need remains for a diverse range of housing delivery, however. While a graduate fresh from Manchester University may not be able to afford a new family home in New Islington or Chorlton, they might choose to live in the home freed up by the professional couple that’s chosen to move there. Delivering more senior housing helps downsizers, leaving larger homes available for growing families.

One of Manchester’s many appeals to employers is that housing for their staff is relatively affordable. As the city attracts highly skilled workers in greater numbers, demand will grow for higher quality homes – a demand that Manchester’s developers are well-placed to satisfy.

View all of our latest Manchester Cross Sector research here.