Bank consolidation plans in Manchester could create more than 300,000 sq ft of available office space in the city centre as RBS, Barclays and Bank of New York Mellon seek to move staff into city centre hubs.
RBS said last week it would vacate its 150,000 sq ft office at M&G’s One Spinningfields Square office by the end of 2018, consolidating its Manchester footprint at 1 Hardman Boulevard, also owned by M&G, where it occupies 350,000 sq ft.
The announcement follows Bank of New York Mellon’s plans to move out of its 52,000 sq ft office at 3 Hardman Street, similarly consolidating under one roof at One Piccadilly Gardens.
Meanwhile, Barclays could be expected to move from its city centre offices at 3 Hardman Street and 4 Piccadilly Place if it creates a 600,000 sq ft central Manchester hub. The bank’s search is focusing on Bruntwood and Select Property’s Circle Square, Peel Group and Legal and General Capital’s MediaCity and in Mayfield, the £900m regeneration project by U+I, LCR, Manchester City Council and Transport for Greater Manchester.
Together, these consolidations could add up to more than 300,000 sq ft of potential available office space in Manchester if Barclays moves forward with its Northern hub project.
Why are banks consolidating?
As headline rents in Manchester push into the mid-£30s, cost cutting is a serious consideration for occupiers, particularly if they have more space than they require. RBS, for example, only used three-quarters of the desk space they had at their Spinningfields Square office.
Adam Posner, head of the property division at KPMG Manchester, says: “We’re in an environment now where pretty much all of the big firms deliver office space that is around two people per desk.”
But both RBS and Bank of New York Mellon have stressed the strategic side of cutting down their footprint. For them, it was a question of cutting space rather than cutting jobs.
A spokesman for RBS said: “As we become a simpler, smaller UK-focused bank and as we encourage more flexible ways of working, we now require less office space.
“In parallel to the exit of Spinningfields, we’ll be investing in and improving the working environment for colleagues in Hardman Boulevard. We do not anticipate any redundancies as a result of this decision and our customers will not experience any disruption as a result of these changes.”
In a similar way, the Bank of New York Mellon said its consolidation is part of its “Workplace Excellence” plan to create more efficient and flexible offices internationally. The plan laid out “a whole new way of working in Manchester”, investing in new technology at One Piccadilly Place to allow all its staff to move into one building.
Beyond banking
The trend goes beyond banks. Posner says: “Some of the professional services firms have consolidated their regional offices and combined smaller offices into bigger ones.
“I don’t think it’s going to be uncommon to see businesses doing that going forward.”
Last November, PwC moved from 101 Barbirolli Square to No1 Spinningfields, taking an initial 67,000 sq ft over three floors. The announcement followed reports that it would close six of its regional offices in Sheffield, Plymouth, Liverpool, Norwich, Swansea and Dungannon.
Like RBS and the Bank of New York Mellon, PwC said that as part of its consolidation it would offer roles to everyone affected. Its decision to open a new office in Manchester and its plan for another office in Birmingham in 2019, the firm said, were part of its commitment to strengthening its presence in the UK regions.
All of these moves, Posner says, are reflections of the UK’s focus on major cities, particularly in the context of HS2 and the introduction of regional mayors. “You can see a lot of political, transport and governance infrastructure put in place in our core UK cities.
“We will see more and more people commuting into the big cities – the Manchesters and Birminghams – from provincial towns.”
City centre living continues to grow as well, with Deloitte reporting more than 11,000 new homes under construction in Manchester, and as that trend continues, both locally and in other major cities, major corporates will have more reason to consolidate.
What next for the second-hand space?
With just 160,000 sq ft of grade A offices available at the start of 2018, following total take-up of 1.2m sq ft in 2017, there could be significant opportunities for proactive landlords prepared to deliver refurbished product, according to the Manchester Office Agents Forum.
The majority of grade A schemes under construction, which include Bruntwood and Select Property Group’s Circle Square (230,000 sq ft) and Barings Real Estate Advisors’ Landmark (180,000 sq ft), will be delivered in mid to late 2019, providing the opportunity for a prelet market once the existing supply is absorbed.
While Manchester’s take-up has been the highest in the regions over the past decade, according to Radius Data Exchange, the vast majority of deals in the city are for fewer than 5,000 sq ft. The challenge for landlords if they have major occupiers relocating is making the space suitable for the wider market.
Posner says: “Making a space work for one business can be very different to making it work for another. It might not be a like-for-like replacement of another firm coming straight in.”
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