It’s no accident

The professional services sector is gobbling up space in central Manchester, but improved transport is attracting occupiers of all shades. Firms with a strong local basis are keenest to expand. Adrian Morrison reports It is typical of the British that TV advertisements for personal injury solicitors – “Have you been injured at work?” – are viewed with a measure of distaste. Americanisation of UK society and the scramble for pecuniary gain are often linked to the destruction of essentially British characteristics. But in property terms, growth in the personal-injury law arena boosted the overall performance of the professional services sector in Manchester last year, and continued expansion is likely this year. For example, Accident Group, based in King Street, has come “out of nowhere” in the past five years, according to one commentator, thanks to changing attitudes to the claims culture. Law firms in general, and not only personal-injury practices, continue to expand in Manchester. Dunn & Co doubled its floorspace to 14,000 sq ft when it moved to Deansgate and that growth is set to continue as the 30,000 sq ft (2,790m2) Observatory site on Chapel Walk was recently acquired for it by Chesterton. Newly merged law firm Pince Curtis Biddle has a requirement for 12,000 sq ft in Manchester, demonstrating a trend among national law firms for regional offices. Chesterton’s Rupert Barron says: “If you look at the major law practices, they all have a need to be in the core cities such as London, Birmingham, Bristol and Manchester. “Corporates are doing it because of the need to compete for business nationally.” Because these firms are tendering for the business of major corporations, they need to squeeze their margins at both ends to be as competitive as possible. This is benefiting Manchester because the unit cost for a solicitor’s time is cheaper than in London, and whole departments can be run from outside the national capital. Occupancy costs are cheaper, too. Concerns over the health of the financial sector also seem to be lifting. Casualties within corporate finance, not to mention the freeze on expansion plans, left a negative aura over the sector last year. The recent decision by Royal Bank of Scotland to take 450,000 sq ft (41,800m2) at Spinningfields (see Mega deals, p110) will bring massive benefits for Manchester’s financial sector and for the professional support services that naturally align themselves with those bodies. Lambert Smith Hampton’s Peter Skelton says: “RBS taking this amount of space at Spinningfields is a huge boost to the city. The whole of the financial and support sector – in terms of accountancy and legal – will grow.” Bank deal an isolated case However, the RBS deal is something of an isolated case and blue-chips are not expected to be particularly active in the coming year. Companies that are locally based and rely on the local economy for their wealth seem to be expanding more than major conglomerates. Part of the explanation is that remote parent companies – especially those located overseas – are less inclined to be expeditious towards expansion. Serviced office provider Stonemartin has teamed up with the Institute of Directors and acquired Peter House in Peters Square. Managing director Colin Peacock says he has been getting enquiries from across the board, many from the professional service sector. “We have had a number of enquiries from [professional companies] for our Manchester scheme, despite the fact we have not yet even begun to market the site,” he claims. Central Manchester’s attractions for occupiers are being enhanced by improvements to the transport network. The benefits for companies are twofold. First, they are ensured adequate staffing because the distance that employees can travel to work has increased, providing the occupier with a larger pool. Second, government restrictions on parking and sequential tests for brownfield sites are easier to comply with because less on-site parking is needed. It is now estimated that more than 40% of employees at Salford Quays use the Metro to get to work, for example. Ironically, some believe that the 10-year delay in Salford Quays getting the Metro enhanced its reputation as a business location. The logic is that the Quays proved itself without the promised transport link and has been improved by it since. Future developments likely to be targeted by occupiers thanks to improved transport infrastructure include Countryside’s Withington Hospital redevelopment and Ask Akeler’s North Manchester Business Park. Some property commentators in the city even foresee a day when large corporations, which left for the business parks 20 years ago, will return to the centre. BP, Shell and Unilever all had a major presence in the core but deserted it many years ago. Now, with a strong public-transport network, these firms may find it easier to attract staff from a location in the core. Major occupiers have magnetic effect In certain centres in Greater Manchester and its vicinity, the presence of major occupiers is likely to serve as an impetus for other occupiers seeking to service or cluster around these companies. IBM has expanded in Sale and Sema has grown in Wilmslow, while AstraZeneca has a huge presence in Alderley Edge. Manchester developer Bruntwood takes the view that the town centres of Sale, Cheadle and Altrincham will continue to be attractive locations for occupiers that do not need to be in the city, because these areas offer good transport communications and a wide variety of facilities for staff. There is still growth in the hi-tech research-and-development sector. Manchester has been developing a reputation in this area over the past five to 10 years, and the computer games industry has grown dramatically in that time. LSH’s Skelton says: “We are seeing incubator-led hi-tech enterprises expanding into larger accommodation. The universities are selling technologies and trying to make money from that, and the Manchester Science Park at Birley Fields will soak up some of this growth.” Nevertheless, this apparent growth cannot be separated from the fact that Manchester, like much of the country, has yet to fully recover from the downturn and the after-effects of 11 September. Christopher Oglesby, managing director of developer Bruntwood, believes that in the next couple of months deals will start to be completed again. He says: “Stages one and two – initial enquiry and viewing – have been going ahead since last December. We are now starting to see stage three, with solicitors becoming involved. “There are certain enquiries at the moment, where companies have US parents, that you don’t know until the document is signed that the deal is done.” He stresses that a lot of these enquiries work to very tight time-scales and anticipates deals being completed within the next six weeks. But Oglesby concedes that the future economy is harder to call than at any other time in his career. The economic fundamentals are strong – for instance, low inflation and unemployment – but more businesses are issuing profit warnings. Analysis by market sector (%) Professional take-up remains the strongest in 2001 Source: Lambert Smith Hampton City-centre take-up – deals over 5,000 sq ft Take-up in 2001 surpassed even 2000’s high levels Property Tenant Area(sq ft) Rent achieved(£ per sq ft) Agent(s) The Triangle Galaxy 102 7,134 14.00 Lambert Smith Hampton/Canning O’Neill Portland Tower XTML 6,250 12.00 Lambert Smith Hampton/King Sturge The Observatory Donn & Co 22,500 19.50 Dunlop Heywood Lorenz/Jones Lang LaSalle The Deva Centre Redman Jones 9,000 6.50 Dunlop Heywood Lorenz Arndale House Inland Revenue 40,000 11.00 GVA Grimley Bishopsgate House, Great Ancoats Street Commonwealth Games Commission 36,000 10.00 n/a Lincoln House, Deansgate Pannone & Partners 7,000 16.00 GVA Grimley Manchester Royal Exchange The Stamp Office 5,945 12.50 GVA Grimley/King Sturge 35 Fountain Street Royal & SunAlliance 52,300 15.00 n/a The Observatory Scottish Equitable 7,094 19.50 Lambert Smith Hampton/Dunlop Heywood Lorenz/ Jones Lang LaSalle St Ann’s House Eden Brown 5,289 14.50 Jones Lang LaSalle/FPDSavills The Observatory Scottish Life 6,695 22.00 Jones Lang LaSalle/Dunlop Heywood Lorenz Barlow House, Minshull Street Manchester city council 5,627 9.95 Lambert Smith Hampton Manchester Royal Exchange Ofsted 16,600 13.25 Lambert Smith Hampton/King Sturge/GVA Grimley Abbey House PSD 9,900 16.00 Lambert Smith Hampton Abbey House Dunlop Heywood 10,034 16.00 Lambert Smith Hampton The Triangle MLS Business Centres 12,603 14.00 Lambert Smith Hampton/Canning O’Neill Victoria Exchange Zendor.com 89,122 12.50 DTZ Boulton House Energy Watch 5,133 14.25 Lambert Smith Hampton 55 Spring Gardens Friends Provident 6,002 16.50 GVA Grimley/King Sturge Westminster House, Portland Street Inland Revenue 15,000 12.50 NAI/FPDSavills Churchgate House, Oxford Street Anite Systems 10,760 11.00 FPDSavills/King Sturge Arndale House Argos 110,000 14.00 GVA Grimley Commercial Buildings, Cross Street BDO Stoy Hayward 19,684 13.00 Lambert Smith Hampton/GVA Grimley Norfolk House, Norfolk Street Euler Trade 7,218 20.00 Dunlop Heywood Lorenz/Insignia Richard Ellis Overseas House, Bridge Street Manchester city council 45,000 13.00 n/a St George’s House, Peter Street Interiors Group 5,099 17.50 Knight Frank Manchester Royal Exchange The Accident Group 15,724 12.50 GVA Grimley/King Sturge Norfolk House ABN 10,000 20.00 Insignia Richard Ellis Barlow House, Minshull Street Parking Adjudication Service 5,670 9.95 Lambert Smith Hampton Pall Mall Court Morrison Serviced Offices 46,000 18.00 GVA Grimley Spinningfields Royal Bank of Scotland 486,000 20.00 Dunlop Heywood Lorenz/Jones Lang LaSalle Bass Warehouse, Castlefield Tetrapack 17,000 14.00 GVA Grimley The Triangle MLS Business Centres 9,669 14.00 Lambert Smith Hampton/Canning O’Neill 76 Quay Street Private individual 5,873 FH sale circa 600,000 DTZ/Stevens Scanlan NB. Total Take-up (including the RBS deal): 1,332,891 sq ft ” Total Take-up (excluding the RBS deal): 846,891 sq ft ” Total transactions: 95 Source: Lambert Smith Hampton