Rents for older office buildings in Manchester have risen by more than a third as businesses compete to secure city centre space.
According to one leading commercial agent the trend has driven up rents for older floorspace in the 10,000 sq ft-plus category have increased by more than 35 per cent since the start of last year — rising from around £17 to more than £24 per sq ft.
Conrad O’Neill, a director at Manchester-based Canning O’Neill, claimed: “We are also seeing incentives harden, down from about 18 months’ rent free for a five-year lease, to nearer 12 months’ rent free.”
As ever, demand is fuelling the price hikes. “There are a number of decent-sized requirements for 10,000 sq ft or more,” O’Neill added, “but they will not look at new build offices because they do not have the budget to pay for them and are forced to look at refurbished space, which is helping to push up rents.”
Recent city centre deals include science giant Hitachi Consulting taking 6,000 sq ft at Bruntwood’s Manchester One, Portland Street, and Gazprom leasing 17,377 sq ft of office space at One City Road. The Russian energy company has taken a three-year lease on the first floor of the building as a short term solution until its new First Street building is complete.
Demand, Canning O’Neill explains, is also spreading beyond the city centre. Acting on behalf of Vanguard Holdings, the agency has completed two lettings at Lowry Mill in Swinton, Greater Manchester; one 5,000 sq ft of deal with children’s clothing importer, Leisurewear International allowing it to relocate from its current base at Salbec House in Salford.
“We’ve probably got another two years before the market reaches equilibrium, rents settle and rent-free periods harden to about six months for a five-year lease,” predicts Conrad O’Neill.
“About that time we’ll see the offices vacated at Barbirolli Square by DLA Piper, Ernst & Young, Addleshaws and the other professionals,” he added. “Once that has undergone refurbishment, we will see it back on the market at rents in the mid-£20s or above.”
One office regeneration scheme already underway is a Commercial Estates Group project to refurbish 45,000 sq ft of space at 196 Deansgate, Manchester. It is upgrading the first and second floors — each measuring 9,798 sq ft — to the same standard as the third, fourth and fifth floors, which have already been refurbished Grade A standard.
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