Fears of ‘drought’ in Greater Manchester office supply

Commercial real estate agents, Knight Frank, are warning of a ‘drought’ in high quality office supply in Greater Manchester, with high demand not being matched by new construction starts.

Data from Knight Frank found there are no new schemes scheduled to start in Manchester city centre, with all work currently in progress set complete by the middle of 2025. Despite the lack of new developments in the pipeline, demand for office space has surpassed its pre-Covid levels in the city-region, while Manchester has seen the fastest growth in rent of any UK regional city, up 13% on last year.

With any new schemes now unlikely to complete before 2027, the commercial agents are warning of a pinch-point in supply. David Porter, head of Knight Frank’s Manchester office, said:

“Developers’ dilemma is intrinsically linked to price of debt and the rise in construction costs. This has a knock-on effect to an asset’s investment value as we have seen investment yields move out from the previous prime rate of sub five per cent.

“But there is still good levels of occupier demand out there. Both from existing companies wanting to significantly increase their floor space to cater for growth and new occupiers coming to the region or city for the first time. The North West is still a highly desirable location for lots of reasons.

“So with this squeeze in supply and demand I think we will see the return of the traditional pre-let where companies with lease events in 3-4 years will sign a contract before work begins so they can secure the best space they can in line with their requirements.”

With investment from the private sector down, Porter also suggests further public sector investment into office schemes, as is available for residential development in Greater Manchester, could help bring forward new project starts and support urban regeneration.

In Stockport, the Stockport Exchange scheme, a partnership between Stockport Council and Muse, has helped meet the shortfall in space in the town centre, with a further 64,000 sq ft of Grade A office space completing in January at 3 Stockport Exchange (pictured). Remaining phases of the development are set to bring forward a further 185,000 sq ft of office space. Across the wider Mayoral Development Corporation’s Town Centre West regeneration area, work aims to deliver approximately 1 million sq ft commercial space.

David Porter added:

“The office is not dead – it very much continues to thrive.”