Development doubles as Manchester's revival gathers pace

5 April 2011

Latest Drivers Jonas Deloitte Manchester Crane Survey records 11 new schemes for 2011 after five in 2010
Highlights:

• Financial and legal firms replace public sector to lead office take-up
• The city’s northern fringe emerges as a key development area
• Budget hotel market continues to expand as occupancy rates top Leeds and Birmingham
• Masterplans for NOMA, First Street, Greengate and Water Street help shape future pipeline

In its 2011 Manchester Crane Survey, property consultant Drivers Jonas Deloitte has recorded a surge in new development activity since 2010 although new starts still remain well below the pre-recession peak of 32 in 2007.

Four new schemes are underway around the city’s northern fringe including the redevelopment of the former Boddington’s Brewery Site as well as within the £800 million NOMA regeneration area – the emerging Co-op Quarter.

The Crane Survey records the lowest level of office delivery in its 13 year history in 2011 with vacancy rates in those buildings completed in the last 12 months standing at 25 per cent leading to little speculative office development this year.

However, following the highest take-up levels in Manchester’s history in 2010 and a lack of new schemes coming forward in 2011, Drivers Jonas Deloitte says a future shortfall of Grade A space is a real possibility with some developers currently scoping opportunities behind the scenes.

Confidence in Manchester’s office market has also been buoyed by a resurgent private sector – with professional services firms accounting for half of all lettings last year.

Drivers Jonas Deloitte says the figures demonstrate that the city is well positioned to shield itself from the Coalition Government’s austerity measures.

In the residential sector, a weak national housing market has continued to constrain Manchester’s residential development after a record low level of completions last year. Three new starts have been recorded in 2011 including Northern Group’s Ice Plant in Ancoats.

Overall the Crane Survey expects residential development to remain in line with recent years with 251 new units set to be delivered over the next 12 months following 232 last year.

Student residential activity has seen several major new schemes emerge on the city’s southern fringes including Unite’s £4 million Arch Bar development and more than 1,200 student beds being granted planning permission in and around the Oxford Road Corridor.

Manchester’s hotel sector has also continued to grow from 2010 with three schemes under construction, including the city’s second Holiday Inn Express in the Northern Quarter and a Travelodge on the site of the former Boddington’s Brewery.

With occupancy rates above the UK regional average, Drivers Jonas Deloitte says further growth is expected with Travelodge planning to build two more hotels in the city this year.

The 2011 Crane Survey concludes on an optimistic note for Manchester’s future and highlights several significant regeneration masterplans in the pipeline.

Ask’s First Street’s revised Development Framework – a project advised by Drivers Jonas Deloitte – has mapped out plans for a new city neighbourhood, while Big Yellow also appointed the consultant to develop a strategic regeneration plan for a 10 hectare area around Water Street in partnership with ITV/Granada and Lend Lease.

Changes in the city’s media sector, with BBC’s move to MediaCity this summer and ITV’s in 2013, will open the door to significant redevelopment opportunities on prime land in Oxford Road and Quay Street respectively.

Adam Robson, senior surveyor from Drivers Jonas Deloitte, said: “The lack of new office development provides fertile ground for new opportunities in 18 to 24 months time, once existing supply has been eaten up. With nothing on the horizon post-2011, large occupiers could soon be considering pre-lets.”

Michele Steel, director from Drivers Jonas Deloitte, said: “In residential, Manchester was quick to turn off the development tap so low levels of supply have helped absorb the large volume of units we saw complete in the city centre between 2006 and 2007. But with the withdrawal of public sector funding for residential developments, it is unlikely that the city centre residential market will see any significant recovery any time soon.

“Last year, it was clear that the public sector’s role was pivotal to Manchester’s property market and despite the onset of this current era of austerity, the City Council’s enduring commitment to partner with and support the private sector continues to drive development opportunities with the future pipeline looking healthy.”

Ends

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