A shrewd emergence?

The south Manchester schemes, though wisely established in an attempt to move out from under the shadow of the city centre, could suffer as economic uncertainty kicks in. David Quinn reports The peripheral areas of Manchester have always fallen into the shadow of the city for obvious reasons. As north west regional capital, the city centre has been able to attract the best office occupiers and has enjoyed an average annual take-up of 63,760m2 (686,330 sq ft) since 1997, according to research by Lambert Smith Hampton. But the supply of new offices inside the city centre is drying up, with no new stock coming to the market until 2003. Agents are beginning to wonder if the larger professional occupiers, such as law firms, will be forced to move outside. “If you look at some of these occupiers, you’ve got to wonder if all their departments and functions warrant £22 to £25 per sq ft accommodation in the city centre,” says one. “It comes down to the value that is put on one building to ring-fence the activities of the company.” Developers of office schemes in city edge locations, like Pochin and Manchester Science Park’s 13,000m2 (140,000 sq ft) Technopark and HBG Properties’ 7,000m2 (75,700 sq ft) No1 and No3 Archway, Birleyfields, will be hoping to capture demand in light of the current city centre supply crisis. Both developments sit in a location mid way between the city centre and the well-established south Manchester business park area on the A5103 Princess Parkway. Developing in spots like this has been interpreted as shrewd in some quarters. But this site is relatively untested, which means others are questioning whether expanding city centre occupiers will be prepared to risk giving them a try. Although the market is much better established, schemes in south Manchester could also suffer as economic uncertainty kicks in and demand from both inside and outside the locality slackens. But agents claim south Manchester, which encompasses parts of both Greater Manchester and Cheshire, will whether the current economic storm more easily than the Thames Valley, for example, because of its varied occupier base. “South Manchester isn’t in distress,” says Mike Hawkins of Lambert Smith Hampton. “We’re not over-reliant on one sector and we’ve got a mature, 15-year-old market.” Take-up and supply are in balance and there isn’t a backlog of new space in south Manchester, according to Ken Bishop of DTZ Debenham Tie Leung. “It is, to a certain extent, recession proof because of the variety of national and international occupiers,” he says. Is the market falling? Simon Reynolds of GVA Grimley agrees. “It’s pure nonsense to say that the market is falling down. There’s relatively little product around and demand has only slackened very slightly,” he says. Institutional confidence in the market is also high, with the recent news that Britannic Asset Management has acquired the investment of AMEC’s latest two speculative phases at Cheadle Royal for £15m. “The south Manchester office market remains a very healthy prospect in view of a relatively limited supply and the ongoing expansion of Manchester Airport,” says Britannic’s Robin Binnie. But despite this confidence, some schemes are stalling. One 3,345m2 (36,000 sq ft) speculative building at Taylor Woodrow’s Christie Fields development has been hanging around since the beginning of the year, prompting talk of problems to come. Agents bat away claims that this could be indicative of a downward market spiral. “It will go,” says Andrew Shaw of Jones Lang LaSalle, bluntly. “It’s not the end of the market because that one building hasn’t let.” But agents do admit that developers will have to pay increased attention to the location of the speculative schemes they undertake in a more difficult economic climate, and suggest that this could be the problem with some of those that have failed to find tenants. Importance of size Other factors to which developers will need to pay attention include the size of buildings. “What south Manchester needs is a controlled supply of smaller buildings,” says Hawkins. “Developers doing one-off, smaller buildings between 8,000 and 15,000 sq ft are disposing of them relatively easily.” Because of the success of south Manchester, some believe that a shortage of staff could be the next problem to hit the market and that other parts of Greater Manchester could benefit. “Not only is the land in north Manchester cheaper but, provided you’re talking about back-office functions, occupiers realise that the demographic profiles are much better,” says Rupert Baron of Chesterton. “South Manchester is on an upward salary spiral, which means lower staffing costs are definitely north Manchester’s unique selling point.” ASK/Akela’s forthcoming 160ha North Manchester Business Park at Moston Brook and Miller/Royal Bank of Scotland’s Omega, near Warrington, present a future alternative to the dominance of the south of Greater Manchester. But it remains to be seen whether they can be anywhere near as successful in the turbulent times ahead. Lancashire, Cumbria and the M6 corridor Office development in this part of the north west has lagged behind much of the rest of the region because of its relative inaccessibility and under-population. Nonetheless, a market does exist – albeit one that tends to rely on indigenous, rather than external, demands. “The source of occupiers has to be inherent demand, which means there is a justification for small-scale developments,” says Mike Hawkins of Lambert Smith Hampton. “There’s hope for strategic sites close to motorway junctions but still, there is very little footloose occupational desire to be there.” Ken Bishop of DTZ believes that both Lancashire and Cumbria cover a “huge area that seems to lack any real demand”, but despite this, some developers are bucking the trend by developing speculative schemes, at least in the south of the region. In Bury, for example, Ron Wood Developments has brought forward the 6,500m2 (70,000 sq ft) Castlebrook Business Park, which will be complete before the end of the year. Moving north, Chorley has also become a miniature development hotspot, sandwiched, as it is, between the M6 and M61, north of Wigan. Rents for office schemes here are likely to bring in around £140 per m2 (£13 per sq ft), with typical land values being up to £494,200 per ha (£200,000 per acre). Delma Developments has begun work on the fourth phase of the speculatively-built Ackhurst Business Park in the town, which will add around 1,580m2 (17,000 sq ft) to the existing 7,430m2 (80,000 sq ft) of offices on the site. “There’s not a lot of speculative development happening in this area and so there’s not that much choice for occupiers,” explains Delma director Mike Grindrod. “We’ve developed everything speculatively and it’s all let very quickly after completion.” Grindrod believes it is Chorley’s strategic positioning that has helped pull occupiers from north Manchester, as well as Preston. The company has been able to maintain a strength of demand from a mix of local businesses serving towns such as Blackburn, Burnley and Bolton. But looking to the north of the region, where Lancashire meets Cumbria and Lakeland, it seems unlikely that the lack of office activity will be reversed. “Preston is where the real market stops,” says Simon Reynolds of GVA Grimley. “There is no sign of imminent growth, a lack of critical mass and in the short term, that’s not going to change.” Merseyside The office market in Liverpool city centre is suffering a similar problem to that of central Manchester, with under-supply of grade A space continuing to be a problem. “Liverpool is coming of age as a city,” says Simon Reynolds of GVA Grimley. “It’s trailed behind overall but it has professional occupiers like any other and they have all been contained within substandard buildings.” The latent demand has not prompted a wealth of speculative office development, however, and developers are tending to wait for pre-lets before going forward with schemes. Agents feel that pent-up demand means something will have to give in Liverpool – and this could be soon. Requirements from a raft of occupiers, totalling anything up to 1.4m sq ft, could spur movement at Teesland’s City Square scheme in Moorfields or at Princes Dock, with law firm DLA rumoured to be at the head of the pack. “It’s very tight indeed but my own view is that we’ll see something starting fairly shortly,” says Nick Rice of Irving Rice. “I sense that we are about to see a lot of movement in the market.” Investment activity in the city centre has recently been concentrated on landmark buildings. Merseyside Superannuation Fund last month purchased the Cunard Building on the Pier Head from Prudential for £18.5m, whilst the Mersey Docks and Harbour Board has put the neighbouring Port Authority Building up for sale. Both dominate Liverpool’s waterfront skyline. Unlike the city centre, speculative development is taking place out of town, where typical rents are around £108 to £118 per m2 (£10 to £11 per sq ft). This is partly explained by the availability of EU and Single Regeneration Budget funds, which have helped spur development on several sites. Chorley-based Delma Developments is undertaking a scheme at Wavertree Technology Park, with SRB assistance. Meanwhile, a planning application for 4,770m2 (51,345 sq ft) of speculative offices was recently submitted by developer Intercity JIS at Estuary in Speke, despite the fact that the site was previously earmarked for bespoke offices only. Estuary is owned by the Speke Garston Development Company, which is funded by EU Objective 1 aid. Outline planning permission exists for up to 81,290m2 (875,000 sq ft) at the site. Across the river on the Wirral, sites are available at Wirral International Business Park in Bromborough but few office cupiers have been attracted to the area, according to agents. Take-up: south Manchester Last year’s figure is unlikely to be repeated for now Year Take up (m2) 1995 37,160 1996 69,675 1997 40,876 1998 53,882 1999 55,275 2000 63,636 Source: Insignia Richard Ellis NB. Includes Warrington Liverpool city centre: typical secondhand office rents Rents are stabilising Year Rent (£per m2) 1997 97 1998 97 1999 102 2000 113 2001 124 Based upon good-quality non air-conditioned secondhand accommodation Source: Irving Rice & Partners Key south Manchester office schemes The south continues to be the primary focus for business park schemes Scheme Availability Developer (Agent) Size Quoting rent(£ per m2) Comment (m2) Enterprise Point, Sharston Now Orbit (Dunlop Heywood Lorenz/King Sturge) 1,911 161 n/a Altrincham Business Park Now Barlows/Schroders (FPDSavills/King Sturge) 1,930 166 Site capacity: a further 3,900m2. 995m2 under offer Christies Office Park Now Taylor Woodrow (Insignia Richard Ellis/Knight Frank) 3,372 199 Site area 4.5ha/18,580m2. Planning obtained for afurther 4,645m2 Turing House, Birley Fields Now Pochin (Lambert Smith Hampton/ Matthews & Goodman) 3,439 188-199 n/a Atlas Business Park, Manchester airport Feb 2002 AXA Sunlife/CTP (GVA Grimley) 7,618 194 Both buildings to be spec built. On site May. Total capacity approx 37,000m2 Kings Reach, Stockport July 2002 Taylor Woodrow (Knight Frank/King Sturge) 5,110 178-183 n/a Cheadle Royal Autumn 2002 AMEC (DTZ/Lambert Smith Hampton) 5,853 215 Total site capacity circa 63,170m2. Funding secured with Britannic for next spec phase Esprit Park, Manchester airport August 2002 Dandara (DTZ/Lambert Smith Hampton) 5,755 164-215 Planning recently obtained The Royals, Sharston Dec 2002 (Donaldsons/DTZ) Ron Wood Developments 5,017 n/a 274 parking spaces. Circa 1,400m2 floorplates Tower Business Park, Scotscroft Building, Didsbury Dec2002 N/a (Jones Lang LaSalle) 5,110 205-215 On site September Manchester Business Park, Manchester airport July Arlington (CBHP/ Dunlop Heywood Lorenz) 5,654 215 Site capacity 62,708m2. 32 acres could be developed Millennium House, Stockport August Bruntwood (Lambert Smith Hampton) 4,041 173 n/a The Alexandra (Harbour City phase two) Autumn Peel (Jones Lang LaSalle/ Dunlop Heywood Lorenz four 5,653 188 Accommodation on ground and upper floors Bradshaw Green, Cheadle Hulme, A34 November Wilson Bowden (Knight Frank/ Dunlop Heywood Lorenz) 3,026 199 140 parking spaces Cockroft House, Birley Fields December Pochin (Lambert Smith Hampton/Matthews & Goodham) 2,527 188 n/a 1 and 3, Archway, Birley Fields Dec 2002 HBG (King Sturge/Jones Lang LaSalle) 7,013 n/a Total of 345 parking spaces. In for planning Stamford Lodge, Wilmslow End 2002 Legal & General/Hines (DTZ) 1,858 n/a Outline consent for 7,900m2 new-build Manchester Road, Altrincham TBC Redrow (Jones Lang LaSalle) 2,323 n/a Planning still to be submitted Optima, St David’s Park, Chester TBC Redrow (Jones Lang LaSalle/Legat Owen) 2,214 n/a Planning obtained. 118 parking spaces Source: Insignia Richard Ellis Key Warrington out-of-town office schemes Warrington and Birchwood present a viable alternative to south Manchester Scheme Availability Developer (Agent) Size (m2) Quoting rent (£ per m2) Comment Birchwood Point Now HBG (Knight Frank) 2,656 177 Final phase under offer. No more capacity Birchwood Park Now MEPC/ Magnus (King Sturge/ Lambert Smith Hampton) 3,344 now 172 (approx) 7,432m2 going on site at end of 2001 Cinnamon Park, Birchwood Now Wilson Bowden (Lambert Smith Hampton/GVA Grimley) 2,203 150 Available in two buildings Daresbury Park Now DeVere/Maple Grove(CB Hillier Parker/GVA Grimley) 2,880 167 5,109m2 under offer. Current phase has a further4,088m2 capacity Pisces, Gemini Business Park Now HBG (Chesterton) 790 + 1,372 152 Two buildings Dominion, Birchwood Now ICL (Chesterton) 3,887 153 (passing) Originally developed by Taylor Woodrow, prelet to ICL Trident, Birchwood Summer St Modwen (Business 2002 Environments) 2,322 Not quoting Planning expected shortly. D&B land also available Lingley Mere D&B Arrowcroft North West (Lambert Smith Hampton) n/a Not quoting Currently D&B only. Total site capacity 92,900m2 Centre Park, Warrington D&B Birse/ Marshalls (King Sturge/ The Elliot Partnership) n/a 145-156 23.5ha in total, circa 6ha remaining. 3,716m2 prelet to NWRDA Source: Insignia Richard Ellis Key North West office sites Development is expected soon at several large sites Scheme Location Size (ha) Developer Comments Davenport Green Manchester Airport 135.6 AMEC/Royal London(Scottish Life) 36.4ha of the total area is developable. Office consent for circa 45,450m2, approximately half the envisaged total. Occupation of the site is restricted by legal agreement Green Property Land Woodhouse Park, Manchester airport 8.5 Green Adjacent to Manchester Business Park Withington Hospital Off Princess Parkway 16.6 TBC Owned by Secretary of State for Health, Manchester city council and the Primary Healthcare Trust. In January resolution to grant outline planning for 25,548m2 of B1, a 1ha hotel site, 600 residential units and community hospital. Tender date: end October North Manchester Business Park Monsall 159.9 Ask/Akeler. Forms part of regeneration of East Manchester as a partnership between Manchester city council, English Partnerships and NWDA. First phase identified and supported by a potential prelet of 18,580m2 to ICL Omega Warrington 225.8 Miller/RBS/ English Partnerships Site comprises the former Burtonwood Airbase, split into two sites, north and south of the M62, of 45.3ha and 180.5ha. New motorway junction off the M62 will serve both sites. Site can accommodate 650,300m2 of B1, B2 and B8. Existing approvals/ allocations Source: Insignia Richard Ellis Key Lancashire office schemes Proximity to the M6 and M61 dictates the inability of office development Scheme Availability Developer (Agent) Size Rent(£ per m2) Comments (m2) Ackhurst Business Park, junction 8, M61, Chorley Now Delma Devlopments(Lambert Smith Hampton) 8,361 129-145 Speculative scheme. Only 223m2 remains Sceptre Court, junction 9, M61/M65 Now Maple Grove (BDH) 1,858 135-140 Units of 279-465m2. 465m2 remaining South Rings, M65/M6/M61 Under construction AMEC (n/a) 2,323 135-140 Total planning in place for 27,870m2. Some D&B prelets in place Fulwood Park, North Preston, junction 31, M6 U/c Kent Healthcare (n/a) 2,323 135 1,394m2 prelet Parklands, Middlebrook, Bolton, junction 6, M6 U/c Orbit Developments/ Burnden Leisure(n/a) 14,960 n/a 7,990m2 already prelet. 1,860m2 under construction. Planning consent for 5,110m2 Futura Park, Middlebrook, Bolton U/c Orbit (developer and agent) 11,890 118- 129 4,270m2 already let. 1,240m2 available end October. Planning for further 6,320m2 Source: Lambert Smith Hampton Development schedule: Merseyside offices Several schemes are awaiting prelets before they can commence Scheme Size Rent(£ per m2) Developer (Agent) Status (m2) Campbell Square, Duke Street, 2,973 135 Beetham Equities (Mason Owen & Partners) Under construction – due for completion imminently city centre Stephenson Way, Wavertree Technology Park 2,112 124 Delma Developments/NWDA (Insignia Richard Ellis/Irving Rice & Partners) Under construction – completion due November. Phase two to commence 2002 Building 12, Princes Dock, 7,896 177 Princes Dock Development Co (GVA Grimley/Irving Rice & Partners) Full planning consent granted. Construction expected city centre to commence shortly City Square, Moorfields, 13,201 162 Teesland Group/Shepherd Development (Mason Owen & Partners/Insignia Richard Ellis) Construction to commence on completion of part city centre prelet, expected soon 5 Temple Square, Dale Street, city centre 4,180 162 Villagate Developments (Irving Rice & Partners/CB Hillier Parker) Full planning application submitted. Proposed start early 2002 Plot G, Estuary Commerce Park, Speke Garston 4,645 113 Intercity JIS/MEPC (King Sturge/ Insignia Richard Ellis) Full planning application submitted. Proposed start early 2002 Phase two, Kings Business Park, Knowsley 2,787 135 Hazels Development Co (Keppie Massie/ Dunlop Heywood Lorenz) Proposed start in early 2002 101 Old Hall Street 18,580 162 Beetham Organization (Keppie Massie) Detailed planning to be submitted shortly. Construction subject to part prelet Capital Exchange, Chapel Street, City Centre 9,290-11,148 194 Rumford Investments (Hitchcock Wright & Partners/DTZ) Demolition of existing building imminent Construction expected to start during 2002. Quay House, Columbus Quay, South Liverpool 3,716 135 Caber Construction (Hitchcock Wright & Partners) Planning application to be submitted shortly. Part prelet will be required to start construction Regatta Place, Brunswick Business Park, South Liverpool 2,620 135 North West Industrial Estates(Mason & Partners/Keppie Massie) Outline planning consent granted. Will require 30% prelet to commence construction Source: Irving Rice & Partners NB. Schemes over 2,000m2 Most expensive North-West office locations by top rent The south continues to dominate Rank Centre Rent (£ per m2) 1 Manchester city centre 237 2 South Manchester 226 3= Salford Quays 172 3= Warrington, Birchwood 172 3= Liverpool, Princes Dock 172 3= Chester Business Park 172 3= Bolton, Middlebrook 172 8 Macclesfield, Tytherington Business Park 168 9 Northwich, Gadbrook Park 156 10 Preston, Riversway 151 11 Bury, Castlebrook 137 12 Chorley, Ackhurst Business Park 135 13 Preston, Sceptre Point 129 Source: Lambert Smith Hampton