Key findings

Market summary

Since the recovery of the construction industry in 2014 across Manchester and Salford, the year-on-year growth in residential development activity has been well-documented by the Crane Survey. Increasing and fluctuating activity across all other areas of development have also been recorded. The regional centre was arguably one of the first areas outside of London where construction activity recovered following the economic downturn of 2008. Since then, it has led the way.

The continued level of activity is impressive given the challenges presented by prevailing economic headwinds during this period. Overall, it highlights a resilient regional economy. Following the latest challenges presented by lockdowns, we’re now seeing trends settle and have a better understanding of what the ‘new normal’ looks like. Our Crane Survey explores these trends in detail and frames development activity recorded against sustainability objectives.

Residential

The residential market activity since 2014 has mainly focused on the delivery of high-density build-to-rent properties in the regional centre. Data continues to show demand in terms of available stock (JLL, 2022), as well as a continued market supply through at least 10,000 homes under construction per annum since 2017 (max. of 14,480 in 2018).

Salford City centre has seen the largest share of development - 13,578 homes have been completed since 2014. 2,632 homes in Great Jackson Street and 2,760 homes in Ancoats and New Islington have also been very active. 18,970 new homes, or 82% of the total supply since 2014, have completed between these three areas alone. While year-on-year completions reduced in 2022, the number of new starts in this area of the market show no signs of slowing down.

According to the 2021 Census data, Manchester’s population is estimated to have grown by 9.7% from 503,100 in 2011 to 552,000 in 2021. Salford saw an even greater uplift with a population increase of 15.4%. Population growth in both areas is higher than the proportional increase for England (6.6%). The results were also slightly skewed by the Census being conducted during a year affected by COVID-19 with students, in particular, temporarily moving out of both City Centres to live with immediate family members.

Based on the current rates of construction and occupation of residential development, a further 20,000 people may relocate to the Crane Survey area over the next three years. Local housing targets suggest this rate of growth will continue to 2035 with a diversifying stock and we’ve explored what this may look like moving forward.

Offices

Construction of office space tends to fluctuate in two-year cycles rather than year-on-year growth, with between 300,000 sq. ft (2014) and 2 million sq. ft (2019) under construction in any given year. Despite people continuing to work from home, the market signals from this year’s Crane Survey are positive with regards to office construction levels and take up.

High-quality spaces are in demand to deliver the best employee experience and differentiate firms in the employment market. During 2022, six offices were delivered while seven office schemes remained under construction across Manchester and Salford at year end. New builds provide most of the market activity with 95% of 1.7m sq. ft under construction and 5% of space being constructed through refurbishments. We’ve analysed this activity in the lens of ESG ambition and legislative changes.

68% of the 700,000 sq. ft of total space brought to market during 2022 is located within the St John’s area and is predominantly pre-let. It is one example of Manchester’s global competitiveness in the tech sector, with tenants such as global media giant WPP and Booking.com choosing to put down roots and base their headquarters in this city. This commercial development in Enterprise City at St. John’s is coupled with residential development through Vita and leisure development through Manchester City Council at Factory.

Take up remains strong in locations such as NOMA, Circle Square, Embankment and the Civic quarter. Salboy, Bruntwood, Muse and Ask remain very active in the office market. Overall, the commercial office market has recorded five new starts across both the City Core and the Southern Arc, which is being driven by the relocation of both multi-national businesses and government departments into these areas.

Tourism and hospitality

Whilst it is not a region that has struggled to attract tourism, the growth in the area’s popularity as a destination has been palpable during this current growth cycle and demonstrated by multiple tourism accolades. Over 1,504 hotel rooms have been delivered in 2022 alone and they continue to come forward across the broad spectrum of hotel market offerings. 33 hotels have been delivered since 2015 to highlight this, which equates to 5,948 new hotel rooms within the Crane Survey area across boutique offers, international brands, and aparthotels.

This popularity is driven by the excellent existing and future tourism credentials of the city through football, live music, cultural events, museums, galleries, and retail, including an ever-improving food and drink scene. Although this sector has experienced significant challenges due to COVID-19, it is also the bedrock of why the city region has been able to recover so quickly. This is coupled with significant improvements in the quality of the new and existing public spaces in the city, typified by the exemplary new Mayfield Park that opened to much acclaim in September 2022.

A summary of all data across all development sectors can be accessed using the interactive map and charts section below, allowing you to explore all development projects, their location and what this means in terms of overall development activity.

You may notice a different feel to our Crane Survey context this year. Our narrative examines how all this development has contributed toward the delivery of a sustainable 21st century urban area, and what more is needed to realise that ambition.

Sustainable growth is key

Let’s make no mistake; addressing the challenges of climate change is fundamental to our long-term stability and prosperity, both in the UK and globally. Due to increasing global urbanisation, cities are a main driver of climate change and therefore must be the focus for reducing our emissions. The construction industry and the operation of all building stock in the UK contributes approximately 40% of all greenhouse gas emissions, with transport emissions comprising another significant proportion.

In 2022, the Manchester Climate Change Agency published an update to their targets of achieving Net Zero by 2038. Much like the predictions from COP27 and reports from the IPCC, there are stark warnings and key challenges to act upon quickly to ensure Manchester can play its part in reducing global temperature rises, as well as improving energy security and reducing inflationary pressures on consumers.

In Manchester, this means retrofitting 84,000 homes by 2025, reducing car journeys from 21% to 10% of trips by 2040, 100% of new houses meeting best practice zero carbon standards and commercial premises to reduce overall energy demand by 61%. Manchester’s science-based target to achieve Net Zero by 2038 - 12 years prior to the national target - is ambitious and driving the ESG agenda for real estate. For example, policy at GM level states all new build developments will need to be Net Zero in operation by 2028.

However, creating a sustainable city is more than just reducing carbon emissions and addressing environmental challenges. It includes other threads of ESG such as ensuring everything that is built serves a key purpose for cities in the future, maintains positive levels of population growth, supports job creation, and induces expenditure in the local economy through residents, workers, and tourists. There are several positive alignments with ESG factors that can be taken from the Crane Survey results, such as population density, mobility, liveability, energy efficiency, reducing operational carbon and maintaining the right conditions to invest.

Densification and movement

An increasingly dense population, driven by the delivery of 23,238 new homes in the Crane Survey area since the beginning of 2014, means more people can live, work, and spend their leisure time in the regional centre and - most importantly - without needing a car. Based on an average population size of 2.1 people per household, the potential population uplift is approximately 48,500 within the Crane Survey Area in the last eight years. Given the Crane Survey area is approximately 9.3 square kilometres (km2), this equates to approximately 5,200 additional people per km2. For context, the overall estimated population density for Manchester is 4,805 people per km2 while nine of London’s Boroughs contain over 10,000 people per square kilometre, highlighting the there is room for further growth. Population growth continues because new residents are attracted by the area’s liveability - It ranked 28 on the Global Liveability Index for 2022, moving up the Index by 26 places in a single year.

All these new residents are within a 30-minute walk or 10-minute bike ride to any other part of the regional centre, which is reflective of how busy the Crane Survey area feels daily. While footfall during 2022 was down on levels recorded in 2019 (-24.8%), almost 30,000,000 visits were recorded in Manchester City Centre between January and November 2022. Monday and Tuesday have seen the biggest reductions in footfall (-30.2%) showing that remote working has had an effect – as explored later in this Survey. Saturdays record a more marginal 16.2% decrease against 2019 footfall levels. Despite reductions in weekday footfall and cost inflation causing further pressure on business, the population increase supported by City Centre residential development has broadly created a more resilient regional centre.

Longer distance and active travel that is sustainable must also be encouraged in cities. The lockdowns temporarily changed traffic flows and, while overall traffic congestion has reduced at peak times, the number of car-based work commuter trips into the City Centre is returning to 2019 levels. However, it is important to note that there are now large parts of the City Centre where access for cars has been restricted and is limiting congestion outward beyond the Mancunian Way. 39% of residents do not own a car in Manchester as a Local Authority and are reliant on public transport for mobility.

This restriction of car movements demonstrates a priority to create a pedestrian and cycle friendly regional centre. Alongside a broad planning policy of one cycle parking space per dwelling, Manchester City Council’s “City Centre Triangle” project aims to create an easier, safer, and more attractive route for people to move between Piccadilly, Victoria and Deansgate stations, while connecting with wider strategic cycle infrastructure investment. Access to Beryl Bikes has also improved micro-mobility and last mile journeys. 38% of those who use Beryl Bikes have reduced their use of private cars. However, there is more room for change as over 250,000,000 car journeys under 1km are made across Greater Manchester every year.

So why does densification and low carbon mobility matter? Manchester is not currently on track to stay within its own science-based carbon budget to reduce direct emissions by 50% (900,000 tCO2) by 2025. However, the population has increased by 48,900 people in the last 10 years while emissions continue to drop. As a result, CO2 per capita in 2010 was ~5.96 tCO2 compared to ~3.26 tCO2 in 2020, with the UK national average being 5.55tCO2 in 2020. As most new residents live in City Centre high density residential schemes, increasing population density in sustainable locations will be critical to reducing climate change. CO2 per capita ought to be another useful metric in this regard.

Improving residential building performance

In addition to the benefits of an increasingly dense and diverse population, building performance improvement is also a useful metric. By looking at all residential developments approved and subsequently built since Part L 2013 came into effect, some interesting results have come to light.

Part L of Building Regulations examines improvements in kilowatt-hours (kWh) per annum and CO2 per m2 against a target rate for a typical new build property. Between 2014 and 2019, schemes had to comply with the 9% improvement on Building Regulations 2013 required by planning policy. Since 2019, the methodology for calculating Part L improvements changed. The carbon intensity of electricity effectively halved to reflect a decarbonising grid, which is now formalised by Building Regulations Part L 2022.

All electric buildings built before 2019 will benefit from this reduced carbon intensity of electricity, but others that have chosen another energy path may need to be retrofitted to reap the same benefits. 18% of all homes in Manchester are heated electrically compared to 8.5% nationally. Our research shows that retrofitting buildings with PV cells can decarbonise developments by a further 10-15%. Battery storage could also be incorporated on site, as could connections into district heat networks where possible.

How can we ensure this all-electric approach benefits all development sectors? More effort must be put into decarbonising electricity in Greater Manchester through onshore wind, energy from waste, photovoltaics, and energy storage. Investment in infrastructure is required so that all new developments can access this decarbonising energy grid while creating opportunities to support it. It is anticipated that demand for electricity will increase by 57% by 2038 in comparison to 2021 levels.

Catering for all occupiers

Sustainable population growth must also cater for long term owner occupation to retain residents who have moved to Salford and Manchester in the last 10 years. Our research shows that the buy-to-let market that started in the middle of the last decade has matured. Rental products are increasingly institutional investment-focused and professionalised, alongside a diversified and improved quality of product. Ongoing activity in this build-to-rent space will be complemented by more owner-occupied, lower density and affordable housing. This is a major strategic push for Manchester and Salford.

As set out in Manchester’s updated Housing Strategy, published in 2022, there is an ambitious target of building 36,000 more homes in the city over the next 10 years. This will include 10,000 affordable homes, 3,000 of which will be in the City Centre. Achieving this will depend on the level of funding provided by Homes England and through Registered Providers. Manchester and Salford City Councils also have their own delivery vehicles – This City and Dérive – to support this ambition.

Increasing development activity of this type has been identified in the Northern Gateway, which targets a 20% affordable provision. The latest figures from 2021 suggest that 1,106 homes in Manchester fall within the definition of affordable rent or ownership and are either approved or under construction. We expect this to increase in both cities based on strategic targets and more recent planning permissions.

One challenge that Manchester and Salford must continue to address is the sustainable provision of student bedspaces. Without this, students risk inflating prices in an already popular rental market or are forced to live in other cities entirely. Accommodation shortages have been exacerbated since COVID-19. This has been caused by two consecutive years of record-breaking student acceptances, a return to campus rather than remote learning, and HMO’s increasingly being converted back into family housing in traditional student areas.

Vita Student has released data that suggests take up for 2023/24 academic year is faster than ever and achieved 100% occupancy for 2022/23 year, highlighting the level of current demand. 582 student bedspaces have been delivered across two schemes (Archway Halls and 84 Cambridge Street), although PBSA within Manchester and Salford observed no new starts in this sector during 2022. To cater for increasing demand and identified need, further activity is expected in the coming years from the universities and private sector PBSA developers.

How offices remain relevant

The needs of the workplace have shifted considerably in the past three years for well-documented reasons. As demonstrated by commuter patterns and overall footfall figures, hybrid working has been adopted across most office occupiers to some degree.

Regarding investment and ESG credentials of commercial office assets, the debate is shifting from whether ESG investing is niche, to how investment managers should respond. Occupiers also look to assets that have suitable and credible ESG credentials to help decarbonise their business. In other words, ESG characteristics of assets now plays a meaningful role in the investment decision-making process.

There are three factors that ensure office workplaces remains sustainable, through their relevance to employees and business owners:

1. To support true hybrid working and a positive employee experience, offices must be flexible to ensure the efficiency and quality of space is maximised to allow for excellent working conditions in groups, providing dedicated collaboration spaces and areas to allow individuals to focus with minimal distractions.
2. Have strong environmental credentials to ensure that buildings are commercially lettable. Investment decisions must also align with the overall change in business sentiment to drive operational sustainability in their organisations, with ongoing facilities management and tech to ensure low carbon operation.
3. Cities should provide a range of different workspaces at different price points to ensure all areas of the office occupier market are catered for and create an ecosystem of space to encourage business growth and inward investment.

Who is hyped about hybrid?

A Deloitte people survey revealed that 81% of respondents anticipate working from a Deloitte office for up to two days a week. The research also showed that 96% of Deloitte’s people want to have the freedom to choose how flexibly they will work. In addition, 86% of respondents ranked ‘collaborating with team colleagues’ and ‘interacting with others’ within their top three ways they envisage using the office. Collaboration, social interaction, and team meetings were identified as the three main drivers for being in the office and have formed the main design principles factored into our new expanded workspace at 101 Embankment.

Looking at the broader take up of new space that has been delivered since 2019, high profile lettings include 115,000 sq. ft by Roku at Bruntwood’s Circle Square, BT taking 115,000 sq. ft at Muse’s New Bailey, Cloud Imperium Games taking and Booking.com occupying 350,000 sq. ft at Manchester Goods Yard and WPP taking 82,000 sq. ft at Globe and Simpson. The occupier market remains in good shape and prospects looking forward remain positive. Bruntwood are committed to delivering further space, as evidenced by new activity at Circle Square and the development of plans for ID Manchester.

Fintech organisation, Starling Bank, has plans to open an office in Manchester during the first half of 2023 and employ over 1,000 people. This highlights the city’s £5bn digital economy and deep labour pools as the reason for the new office. Cloud based accounting firm Xero have taken 13,200 sq. ft in Landmark, reaching £40/sq. ft and setting a new headline rent for the city. This influx of tech companies provides more resilience in local office markets as they remain a dominant form of new occupier. 28% of total space under construction is pre-let with take up exceeding 1m sq. ft in the city overall.

North shoring of government departments also creates additional demands on the available supply. The Government Property Agency (GPA) taking 130,000 sq. ft at Plot 9a First Street and a refreshed strategy for the Central Retail Park by Manchester City Council sets out that the GPA is exploring options to deliver office solutions in Manchester that meet the needs of various civil service departments. Securing investment from the GPA would significantly boost the region’s future economic growth. A report to Manchester City Council’s Executive Committee states that up to 8,000 jobs could be located here.

Flight to quality

ESG credentials now form a critical part of real estate investment decisions - building performance in the office market is key to attracting finance and occupiers. The amount of vacant space within the Grade A office market is circa 9% lower than the vacancy rate of Grade B office space, as well as vacancy reductions across the board since 2020.

While the operational and environmental performance of refurbishments, particularly listed buildings, are difficult to meet the standards of new builds, they do provide significant embodied carbon savings comparatively. Delivered schemes, such as Transmission and Bonded Warehouse at St. John’s, the Listed NOMA estate (Old Bank, Hanover and Dantzic), Havelock, and Rylands, as well as planned future redevelopment of Pall Mall Court, the Great Northern Warehouse, and Kendal Milne, demonstrate this. When combined, they offer more than 1.7m sq. ft of Grade A space equal to the total under construction at year end 2022. The work to refurbish Manchester’s Grade I Town Hall also deserves acknowledgement and is due to completed in 2024 following the delivery of the new revamped Albert Square. This project shows how refurbishments deliver on broader ESG objectives, as they are often heritage assets that also play a key role in placemaking.

We predict that the proportion of refurbishments in the commercial space, brought to market, will continue to increase as pressure mounts on asset managers to improve the EPC Certifications awarded to buildings. From April 2023, offices will need to be above an EPC F rating to remain lettable, which is approximately 10% of all current office building stock. Minimum standards will need to rise to an EPC C by 2027 and B by 2030, the latter of which is only achieved by 23% of building stock outside of London.

While EPC is not a perfect measure of building performance and is likely to be replaced by a new standard over time, substantial private sector investment will be required. Upward pressure on rents in the EPC B+ market may cause investors to move quickly, so that they can benefit from attracting the best occupiers who need to relocate. While current inflationary cost pressures create a challenging environment for investment, an uplift in the value of lettable space may drive asset managers to make decisions quickly given upcoming EPC deadlines.

As well as the quality and environmental performance of space, the type of space is critical to a sustainable employment market. Workplaces in a city form part of the business ecosystem and all contributing factors need to function properly for it to remain sustainable in the long term. Talent, business diversity, and providing the right spaces for these businesses to occupy are all key ingredients to supporting this ecosystem and making it resilient.

Large floorplates in high-quality, well-performing office space only matter if there is a strong pool of talent for multinational companies to tap into. While this is provided by a range of Higher Education institutions operating regionally, hybrid and remote working patterns mean that this talent does not need to be as local as it once was. The creation of smaller and lower cost, incubator workspaces provide critical support for entrepreneurial high growth businesses, which may ultimately fuel demand for larger workspaces as these businesses grow. We’ve seen these incubator spaces emerge in new developments at St. Johns, Circle Square, Manchester Science Park, Electric Park and Great Northern. This dedicated incubator space market is shared with serviced office providers such as Spaces and WeWork, and others, which creates a competitive challenge.

Sustainable visitor economy

In 2019, tourism activity in Manchester generated approximately £5.16 billion annually and hotel occupancy was consistently over 80%. Hotel occupancy rates in the North West fell dramatically from 81% to 48% in 2020 due to the COVID-19 health crises. Questions were asked how quickly this sector of the economy could recover and what conditions would benefit the tourism sector in the long run. The carbon footprint of travel was also scrutinised – especially aviation.

Manchester’s tourist market started to recover in 2021. It attracted 4m staycations and 306,000 international tourists, making it the most visited city in the UK behind London and Edinburgh. Hotels returned to 75% occupancy by June 2022 and Manchester’s annual growth forecast for tourism is projected to be 5% per annum up to 2025, while UK growth is forecast to be 3.8% annually.

In part, this is due to the regular accolades the city receives. Manchester is the only UK city to feature in Lonely Planet’s Best in Travel 2023. It is described as “brilliantly creative, proudly musical, and gastronomically diverse”. National Geographic heralded Manchester as a ‘Best of the World’ destination for travellers in 2023. While Manchester is referenced in these awards, it’s important to recognise Salford’s past and present cultural value.

The future delivery of the Factory, Co-op Live and the revamped AO Arena are hotly anticipated in 2023 as part of 300,000 sq. ft of new leisure floorspace dedicated to the tourist experience. Live entertainment including sporting events has - and will continue to be - a main driver of hotel occupancy. Research indicates that Manchester’s live entertainment market has the potential to accommodate an extra 2.05m visitors per annum by 2032.

Balancing the demands of tourism with domestic challenges is demanding for any destination and will vary considerably. In any large metropolitan area, an under supply of appropriate, traditional hotel and aparthotel accommodation for visitors can cause a proliferation of Airbnbs and compete with the residential market. The number of Airbnb listings in the city tripled to 2,820 between 2016 and 2020, which could have otherwise housed residents permanently. However, over 1,500 hotel beds were completed in 2022, with more in the pipeline, on site and with planning approval to address market requirements. The number of new hotels brought to market in 2022 is due to delayed starts and opening dates during 2021.

City Centre living is here to stay. However, it should be noted that an increasing residential population in the City Centre may clash with established nightlife. Examples include the ongoing noise abatement saga at Night and Day. A positive relationship must be formed with the nightlife that has made both cities so famous, as well as cater for tourists visiting the city with a range of overnight accommodation offers.

Outlook

Despite positive levels of development activity compared to other cities in the UK outside of London, there are economic headwinds that pose challenges. According to the Deloitte CFO Survey Autumn 2022, weak economic growth, a shortage of skilled labour, and rising energy costs were identified as the three factors likely to hold the most significant risk for businesses over the next year. Economic and geopolitical uncertainty when coupled with high and rising interest rates, has led to a sharp pullback in risk-taking across all sectors.

All this considered, creating a greener economy will remain a priority until global CO2 emissions have peaked and are sequestered sustainably, which may address challenges such as energy bills. We’ve suggested what effect that this has had on the development industry in recent years and how development is contributing to the sustainability agenda. There are several other important contributing factors to watch:

1. Sustainable transport: notwithstanding improvements made towards walking and cycling, low carbon and cost-effective access into the City Centre remains an ongoing challenge for all cities. TfGM’s regained ownership of the bus network will help, but electrification of local and regional rail services should also remain a priority, as should an end to pay disputes. The expansion of the Metrolink to Trafford and down to Stockport shows interdependencies between boroughs, especially working commutes. From a regional transport perspective there is lots to consider when it comes to reducing car-based trips, including what an equitable clean air zone looks like. The arrival of HS2 continues to be at the top of the transport agenda and the effect this will have on Piccadilly station and surrounding areas.
2. Decentralised and onsite energy infrastructure: Following Manchester Metropolitan University’s and the City Council’s District Heat Networks delivery, energy intensive uses benefitting from single ownership could lead to increased take up of onsite renewable energy generation and battery storage. There will be a continued need to move away from reliance on fossil fuels. This is likely to result in an increased demand for electrical energy as the number of all-electric buildings through new build and retrofit is set to grow. The Greater Manchester Environment Fund may also provide an opportunity to approach energy generation and storage holistically across the wider region and co-ordinate decarbonisation efforts.
3. Nature-based solutions: Mayfield Park has brought 2.6 hectares of new greenspace that acts as a sponge for the city in high flood events, complete with 142 new trees and almost 300,000 plants. This supports the wider ambition of Manchester’s refreshed Green and Blue Infrastructure Strategy. Tweaking the design and construction process of Mayfield to date, working with what is already on site, has saved approximately 240 tonnes of embodied carbon. This adds to Mayfield’s sustainable credentials and is a lesson all developments can learn from. Similar amounts of public space are expected to come forward as part of both ID Manchester and the Lower Irk Valley, which will no doubt carve out their own identities.