Pannone in the market

Yet another major Manchester based law firm is seeking a large new headquarters in the city. Pannone wants to move out of its Deansgate building by the spring of 2014 and is using p3 to find a site of 8,826 sq.metres (95,000 sq.ft.). It has 620 staff in Deansgate, Hale, Alderley Edge and London. Pannone Managing Partner, Emma Holt, said: “We have spent a great deal of time this year finalising our strategic growth plans to position the firm to capitalise on opportunities in the evolving legal market.” She indicated that Pannone might go for two properties in the city centre to cope with its needs.

Catering for the media

In the competition to attract new investment, Manchester has stolen a march on many cities in the UK and Europe by having a major new media complex in Salford Quays.

The scheme by Peel that has brought in the BBC and ITV is of such a size that it has impacted on the whole UK media industry o the point where a wide range of companies catering for media want to be located in the region. This potential has prompted Canning O’Neill to start a new company focusing on the needs of the media, a sector of the economy that was already thriving in the region with a considerable history, including being the most important newspaper centre in the north of England for many years Mark Canning said: “We have seen a dramatic increase in enquiries from media companies and realised there was the potential for a company focused on the industry. In my view, this is the most important trend I have seen in my 22 years in Manchester.”

Among the initiatives from Canning O’Neill is a website devoted to the media industry This is not something that has come out of the blue, because they already had considerable experience of dealing with media requirements.

“We have been involved in filming, notably at the Soapworks,and are familiar with the needs of media companies,“ said Canning. The creation of a new company at a time of tough economic conditions speaks for a degree of optimism. Another new company is Capital & Centric which brings together two North West developers, Tim Heatley and Adam Higgins. Both have considerable experience, with Heatley having been a director of Modus while Higgins has been with Peel, Ask and Manchester Property Alliance Group.

The company’s strategy is to build a portfolio organically without exposure to excessive debt. Heatley said: “The current market provides an opening for companies run by individuals with extensive experience but without the legacy of servicing debt with their portfolio.”

Axa build

Axa Real Estate Investment Managers are likely to be one of the gainers from the current market having received planning permission for the £50 million office scheme at St Peter’s Square. It manages this property on Dickinson Street, fronting St Peter’s Square, for the Co-operative Insurance Society and will now develop a property with a 12 storey structure of 10,033 sq.m. more than double the existing building. WHR and CBRE are lettings agents for a project that apparently depends on a pre let to trigger construction.

The property will meet the top BREEAM standards on sustainability. Axa’s Dorrien Thomas said: “In recent years, Manchester has firmly established itself as England’s premier business location outside London and we are confident that the new development’s prime city location, together with the quality of the space, will make it an ideal destination for local, national or international businesses.”

Attracting investors

F&C Reit Asset Management has bought the 7,060 sq.metres Boulton House, Chorlton Road, Manchester. F&C’s Daniel Plummer said: “We recognise Manchester attracts top inward investors and is a continuing base for existing businesses resulting in a strongly performing occupational market.” Greg Ball of Jones Lang LaSalle, letting agents on the property, added that F&C “take a competitive approach to quoting rentals and offer flexibility, as we intend to subdivide one floor into small suites.”

Holding up

It may surprise the more pessimistic forecaster in the UK, but the regional commercial property market is holding up well and is set to at least match last year’s outcome.

Among the major cities, Manchester has the best balanced market, helped by the scale of its economy and strong entrepreneurial spirit as exemplified by Media City and Spinningfields.

What is happening is that the downturn in the UK economy is providing a test for all regional economies and markets and those with the greatest resilience are emerging as stronger entities. To some extent the fierce competition between Manchester’s two football teams illustrate that spirit.

Analysing the first nine months’ figures for regional office markets, Jones Lang LaSalle (JLL) expects aggregate take up by the year end to equal 2010. JLL notes that in the third quarter rents in Manchester increased by 5.3% on the
previous three months and the Grade A vacancy rate is only 2.1%. Given the tough market, those are impressive figures. Even so, Peter Skelton of Lambert Smith Hampton said: “The market is extremely quiet and it appears that a short term approach has returned bringing a lack of decision making.

That contrasts with the start of the year when there was expectation that we were overcoming the financial problems in the UK.” In his view, the office market lacks direction and there is no confidence that it has reached the bottom. One of the future problems could be the amount of property that will be released by the banks holding it because of bad loans.

So far, financial institutions have been unusually careful in the release of this property but some is being filtered out, notably from Irish sources. In fact, the overall picture of the market can be painted in brighter colours because of planned new development and demand from large companies. An indication of the demand is that there are requirements for at least 27,870 sq.metres (300,000 sq.ft.) of Grade A offices, led by BUPA with a need for 13,006 sq.metres (140,000 sq.ft.).

The impetus is that a majority of its leasing contracts end in 2015. Another major requirement is from Jacobs Engineering for a regional headquarters of 9,290 sq.metres (100,000 sq.ft.). In this case there is the question of whether the company takes existing space or goes for the option of design and build. Also in the market for a large office is the insurance company Aviva.

Setting a benchmark

A key investment sale, of One Piccadilly Gardens, would set a new benchmark for Manchester if Europa CapitaI goes ahead with the suggested purchase from Irish investors.

The 13,935 sq.metres (150,000 sq.ft.) mixed use complex is one of the properties expanding the boundaries of the business district. The price would give it a yield of 6%, which is a top rate for the city.

It is well over a year since the last significant investment deal when Luxembourg based Aerium bought 3 Hardman Street, Spinningfields for £180 million and a yield of 6.25%. One Piccadilly Gardens is the type of prime, well let, property that will appeal to foreign investors.

Even so, the price is no improvement on what it sold for six years ago. Peter Skelton of Lambert Smith Hampton said of the current market for investments that: “We have crossed the threshold of investment buying as it moves out of the south east.”

As far as the letting market is concerned, he said that there have been an encouraging number of smaller transactions. He added that some substantial new developments were “on the cards.”

According to Knight Frank’s ROMP survey, the office vacancy rate in Manchester is 15% For comparison, it is 12.4% in Birmingham, 10.9% in Bristol and 11.4% in Leeds.

Winning design?

A reminder of the quality of the new developments in Salford Quays has come with the short listing of the MediaCity footbridge for an award by the Institution of Structural Engineers.

The structure is a cable swingbridge providing pedestrian access over the Manchester Ship Canal into the heart of MediaCity. According to the organisers of the award for structural and engineering excellence, the footbridge has been designed to respond to the particular geometrical constraints of its location. It anticipates future redevelopment of Trafford Wharf to the south and in conjunction with the existing Lowry Bridge enhances pedestrian links for the area as a whole.

The results of the competition for the award, which has been in operation since 1966, will be announced in November. The impact of MediaCity on Greater Manchester has been highlighted by Property Secrets, an investment organisation.

It listed a number of positive points for the city, namely:

• The movement of thousands of BBC personnel from London is having an impact on the residential market and a range of media and creative organisations;
• A 2.7% increase in the turnover of retail businesses in the year to March, according to the data organisation CityCO;
• A 12.8% rise in passenger numbers at Manchester Airport between February and March;
• A report by Knight Frank dubbing Manchester as one of the UK’s best cities with the strongest investment potential.

Alan Forsyth of Property Secrets said: “Demand for new properties in prime locations is experiencing strong growth and increased job opportunities, such as in Manchester, has meant an increased number of people buying properties in the city.” A similarly upbeat analysis of the impact on the local office market has come from officebroker.com. It reports increased demand from local businesses for office space in the area through the impact of 2,500 employees moving into MediaCity.

Jim Venables of officebroker.com said: “As a company we have witnessed an increase in demand in and around Salford Quays since the beginning of the year, a rise which is reflected in the personal experiences of many local providers we work alongside.”

Mark Canning of Canning O’Neill said: “Our experience backs up the optimistic views of Salford Quays where, for example, half the Metro building has now let with Insight taking 1,672 sq.metres (18,000 sq.ft.).”

The impact of MediaCity has brought a host of lettings at Digital Park and Digital World Centre. For example, Swiss Post has taken Unit 3 at Digital Park as an extension to its existing facility. Canning said of another new scheme, the Soapworks development, that “we are seeing considerable interest from potential occupiers.”

Arab contact centre

One important result of the expansion of the airport is that Etihad Airlines, the national airline of the United Arab Emirates, is to locate a contact centre there that will employ 160. It will be in operation in 2012.

Etihad’s James Hogan said: “We looked closely at a range of potential locations in the UK and Europe, seeking the population base with the right mix of languages and skills as well as a high quality of telecommunications and infrastructure.”

“Manchester offered us everything we needed and had the added attraction of strong, well established business links with Abu Dhabi”. Sir Richard Leese, Leader of Manchester City Council, said: ”It shows that Manchester continues to be an attractive investment location for global businesses.”

Axa acts

A further boost to confidence in Manchester has come from Axa Real Estate Investment Managers going ahead with the £50 million St Peter’s Square project. Axa manages this on behalf of the Co-operative Insurance Society and will replace Peterloo House with a 12 storey, 10,033 sq.metres (108,000 sq.ft.) building designed by Squire & Partners with WHR and CBRE as letting agents.

Equally as important is that KPMG has taken a pre let on 1 St Peter Square, further boosting confidence in the city centre, said Chris Mulcahy of Jones Lang LaSalle. He noted that city centre first half take up was 16,258 sq.metres (175,000 sq.ft.), which was below average.

“I expect the full year to be around 60,385 sq.metres (650,000 sq.ft.). There is a growing shortage of Grade A space,” he added, ”with Spinningfields’ existing buildings almost full.” He believed that developers would take advantage of the situation and start on new schemes, as illustrated by the Co-operative.

Andrew Timms of Edwards & Co said: “The market has not been as bad as we expected and I believe the year could see take up of over 65,030 sq.metres (700.000 sq.ft.). We also have some substantial schemes in the pipeline, such PRUPIM in Lincoln Square and ING’s plans for 250,000 sq.metres (2,690,998 sq.ft.) on the edge of Spinningfields.”

ING is seeking a development partner, on behalf of the West Midlands Metropolitan Authorities Pension Fund, for the project, which will transform the linked Byrom House and Astley House buildings into one large scheme. Also on the horizon is a major project by Siemens for its 21 acre site at Princess Parkway, where it is also seeking a development partner. The site, on the outskirts of Manchester, could house a 92,900 sq.metres (1 million sq.ft.) mixed use scheme. It will include a new 9,755 sq.metres (105,000 sq.ft.) office for Siemens plus an energy centre.

Another positive event is an Indian call centre taking 3,716 sq.metres (40,000 sq.ft.) in an Aegis property in the city centre.