Massive surge in demand for new office floorspace is driving up rents, according to experts
Law firm Freshfields Bruckhaus Deringer will take 80,000 sq ft of space at One New Bailey
Manchester is the most expensive city to rent an office outside London – and almost double the cost of Liverpool.
Data from surveyors Lambert Smith Hampton and Knight Frank shows that Manchester is as much as 50 per cent more expensive that other cities, making its Northern Powerhouse rivals look cheap.
The relatively high cost of Manchester offices has raised fears that the city could miss out on “Northshoring†– cutting costs by moving offices from London to cheaper Northern centres, as an alternative to moving them off-shore.
Lambert Smith Hampton say top rents are currently £32 a sq ft.
However, some deals have been agreed at £34 a sq ft and most observers expect this to be confirmed as the city’s top rent by the end of the year.
A massive surge in demand for new office floorspace – soaring 166% say LSH – is driving up rents.
However, Liverpool’s office rents are little more than half that of Manchester, with the city recording top office rents today of around £18 a sq ft.
Manchester’s closest rivals are Birmingham, at around £31.50 a sq ft, and Aberdeen at £32 a sq ft.
Research by Knight Frank shows that rents in Edinburgh are predicted to reach £29 a sq ft by the end of this year.
Leeds is expected to reach £27.50 a sq ft by Christmas, its highest ever, while Bristol is expected to end the year between £28.50 and £29.50 a sq ft.
Elsewhere Sheffield has been stuck at £20 a sq for many years, but could rise to £22 a sq ft, the same as Newcastle, while Cardiff is £23 a sq ft.
Property industry analysts say Manchester’s reputation as an increasingly expensive city is unlikely to damage its prospects of securing Northshoring deals.
The risk is said to be limited because most Northshoring operators are moving from London, where top rents are as much as three times as expensive as Manchester’s.
For many London occupiers Manchester seems cheap, while still offering the kind of big-city facilities they have come to expect in the capital.
Recent deals including the 80,000 sq ft letting to magic circle law firm Freshfields Bruckhaus Deringer at Muse’s 125,000 sq ft One New Bailey office scheme, are hailed as proof that Manchester’s high rents do not deter incomers from London.
Most tenants do not pay £34 a sq ft – or anything like it, say specialists. Refurbished properties can be rented for figures north of £20 a sq ft, rent-free periods can substantially cut rents on new city centre blocks, and brand new offices at business parks are £22.50 a sq ft – which compares well with other cities.
Manchester surveyors say that Northern Powerhouse rivals like Liverpool, Sheffield and Newcastle are unlikely to scoop big ‘Northshoring’ deals because the cost of building new offices is higher than the current market rent.
To allow for construction costs, surveyors say a rent of £22 a sq ft is the minimum necessary to pay for an office building – and developers will not risk building new offices in Liverpool, Sheffield or Newcastle without certainty they will get their money back.
