COMMENT: Since the onset of Covid-19 the Manchester office market, like all other regional office markets nationally, has had to overcome a number of challenging political and economic impacts. However, now that we’re seemingly out the other side of the pandemic, where has this left Manchester’s occupiers and how are they shaping the market as we return to normality?
One thing is for certain – the pandemic certainly made many occupiers nervous about committing to longer term leases, and those that were required to make a decision due to lease events in 2020/2021 are only now beginning to learn if the choices they made were the right ones. SMEs have generally been the quickest to decide on their real estate strategies, given that their reporting and decision making process is often a lot more straightforward than larger corporates. However, the common theme across businesses of all sizes is that staff engagement is now front and centre when it comes to the location, type and quality of office building under consideration.
Flex and focus
When acquiring new workspace, we are seeing similar requirements from occupiers regardless of size or industry. First and foremost, flexibility is now key – whether that’s through lease lengths, break rights and pre-emption agreements or supplemental flex options within the building itself. Wellness is also now high up the agenda, with businesses seeking to minimise staff turnover and maximise productivity, with a focus now not only on wellbeing in the workplace but equally at home or even on the commute. Occupiers are also putting an increasing emphasis on creating mutually beneficial relationships with landlords, and considering whether or not there can be a true partnership in supporting each other’s goals, particularly with regards to sustainability and wellness.
In terms of take-up, unsurprisingly the tech sector has dominated over recent years, accounting for an average of 24% of take-up in the five years to 2020 (pre-pandemic), and rising to 34% in 2021. A good example of this is the growing demand in the gaming sector, which has seen the likes of Cloud Imperium take a significant volume of space at St Johns, and with Epic Games (Cubic Motion) taking a substantial part of Bright Building at Manchester Science Park. Excitingly, we are continuing to see other large global gaming companies looking to relocate to Manchester to take advantage of the established talent pool rising out of the city’s universities.
What has been interesting to see is that these types of occupier are now looking at varying types of office space that historically would have only been the focus of professional services companies. The ‘traditional’ submarkets of Manchester city centre are becoming increasingly blurred as occupiers begin to involve their staff in the decision making process. Previously, we would have seen financial and professional services firms focusing on the likes of Spinningfields or the prime core, with smaller TMT occupiers looking in and around the Northern Quarter and Ancoats. However, we are now seeing the reverse of this as both ends of the market adapt their product offer.
In order to attract a more diverse mix of tenants, landlords in the prime core and Spinningfields are now providing more ‘exposed/industrial’-style buildings, while the Northern Quarter is offering larger floor plate options to accommodate demand from large corporates. There is so much variety now in each area that the specific city centre location is no longer the crucial factor it once was, with other elements such as amenity, office quality and ESG being equally as important – if not more so.
As time progresses it will be interesting to see how all of these factors play out as we achieve a post pandemic equilibrium. With major new schemes coming to fruition, such as Circle Square, First Street and NOMA, it’s certainly an exciting time for the city and for the occupiers that make up such a vibrant and diverse office market.
Andrew Cooke is an associate director at Savills
