Manchester is facing a shortage of prime commercial space in an era where an increasing level of occupier demand is focused on best-in-class offices. Since the pandemic, the flight-to-quality trend is real and due to a challenging economic climate – high build cost inflation, expensive debt and softening investment yields – development economics have halted the supply pipeline.
GMCA’s announcement to provide long-term investment for new commercial space being delivered is a win-win for the region – creating an environment that sees new schemes come forward and also generating financial returns that can be reinvested locally on a cyclical basis. GM’s Good Growth Fund has got this right, this integrated investment will help bridge the current viability gap and see the region continue to prosper.
The funding will be deployed to provide an excellent selection of new and refurbished product in buildings ranging in size from 80,000 sq ft up to 225,00 sq ft. The commitment will unlock new floorplates from 10,000 sq ft up to 26,000 sq ft - the various schemes will provide essential workspace for a wide scope of businesses.
The completion dates of the projects appear incredibly well considered, with space expected to delivered on a phased basis throughout 2028 and 2029.
The schemes all have an implementable planning permission and are “oven ready” – spanning across three micro locations within the city. This support will see some of Manchester’s most iconic Listed buildings have a new lease of life. The Kendal building will be repurposed to prime character workspace that will house over a thousand jobs.
The new commercial and lab space will stimulate economic activity across a variety of sectors including financial & professional services, tech, cyber, life sciences and advanced manufacturing. – a ll critical growth sectors in Manchester’s ever-expanding economy.
The rental profile of the buildings is also an important factor to consider, with the schemes likely to be launched at rents ranging from £45.00 per sq ft with some space expected to exceed £60.00 per sq ft by the time of completion. This will set an important new rental tone for the city.
Manchester’s existing prime office supply will be absorbed by the end of 2026 (based on the existing absorption rates and live tenant demand). The current new build and refurbishment schemes under construction and to be completed from the start of 2027 totals circa 900,000 sq ft.
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Even with an additional 600,000 sq ft of office and lab supply expected to be delivered via GM’s new Good Growth Fund, assuming a consistent quarterly take-up of 150,000 sq ft of prime space through to the end of 2029, Manchester is still projected to face a shortfall in prime space.
The new schemes coming forward are critical to fill the chronic gap in supply – however there is certainly room for more office space to come forward in the immediate future. The demand will comfortably absorb the new pipeline, but importantly set new headline rents and provide a platform for more exciting schemes, both new and refurbished, to come forward on a viable basis.
With the new wave of supply, the outlook appears healthy for the region – it will ensure the city’s economic health is safeguarded without oversaturating the level of prime space in the city.
- Will Lewis is founder and CEO of multidisciplinary property consultancy OBI
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