Manchester ranked top regional creative market

Manchester, UK

Manchester has been ranked the number one regional creative market in the UK, underscoring its appeal to companies seeking to relocate offices.

CBRE’s “Creative Regions” research, a first of its kind report, identifies the top 25 regional creative locations in the country. While 11 of them are located in the East and South East, Manchester ranks in first, ahead of Reading and Edinburgh.

Reading “punches well above its weight as a creative talent destination, given the size of its office market,” notes CBRE, while Scotland performs well, with Glasgow also in the top five.

Common characteristics of successful creative locations, which have the key ingredients required by film, TV, media, publishing, programming and information services, include large concentrations of creative businesses and professionals, deep talent pools of highly educated graduate populations, growing millennial populations, good transport connections, quality of life and proximity to world class universities with strong research and computer science ratings.

Manchester performs well across these by some margin, with the UK’s largest number of creative industries businesses, the largest millennial population, a deep talent pool of creative professionals with a skilled graduate workforce and access to universities with strong research and computer science rankings. Employment and office costs are relatively modest, while earnings to average house prices are reasonable, particularly when compared to London or a number of South East locations, such as Oxford and Cambridge.

It is not only the largest office markets that make it into the CBRE top 25. Traditional but smaller locations in the Thames Valley such as Oxford, Newbury, Bracknell and Slough also rank highly.

From a regional perspective, it is significant that 11 of the top 25 creative talent locations are in the East and South East. For creative talent, the cost of living is generally higher in these locations, but is offset by higher average salaries; for employers, office rents are greater, but they benefit from being able to source staff from some of the greatest concentrations of tech talent in the UK. Strong transport links and connectivity to London are undoubtedly contributing factors.

“The tech phenomena looks set to continue in the UK,” says James McLean, Senior Director of the CBRE Advisory & Transaction Services Occupier team. “Technology and creative industries, in general are not affected by regulatory restrictions or fears over single market access. Contrary to common perception, a large number of these companies are based outside of the capital. Evidence shows that a number of regional centres also contain a critical mass of talent necessary to compete successfully in this sector. There are many other tempting reasons to draw creative industries businesses to the UK regions such as attractive quality of life and favourable cost of living. Indeed, given the growing cost of higher education, and the cost of living in the capital, the large regional centres are increasingly proving a compelling proposition for graduates and employers alike.”

 

Regional office take-up remains resilient

27th January 2017

Take-up in the UK’s regional office markets remains resilient, despite the looming negotiations surrounding the UK’s exit from the European Union.

New research from CBRE shows that demand for office space across the UK totalled 5.6 million sq ft in 2016, a small 7 per cent decrease from the 2015 total of 6 million sq ft and just 3 per cent below the 5 year average.

Take-up activity in the second half of the year, following the EU Referendum result was only 3 per cent lower than the first half of the year.

Bristol is highlighted by CBRE as a stand-out market, with occupier activity up almost 60 per cent year-on-year – boosted by a pre-letting of 107,000 sq ft at 3 Glass Wharf to HMRC – but Manchester, Liverpool and Glasgow are also highlighted as improving hotspots.

Manchester did not beat its 2015 level, but outperformed its five-year average by 16 per cent, with Q4 recording a total of 621,000 sq ft, the highest level of office space take-up since 2010.

In contrast, take-up in cities such as Leeds and Edinburgh has struggled to keep up with the very successful years these cities have seen since 2013, notes CBRE. Birmingham, however, was just slightly below its five-year average, despite being down 28 per cent from 2015.

“Requirements continue to circulate, so it still remains to be seen the extent to which the Brexit vote will dampen down occupier demand in the regions. However many markets will welcome the timing of the Government Property Unit, who have launched a search for a number of hubs in different UK cities, all of which are very large compared to the typical requirements that drive the regional cities,” says Emma Jackson, Associate Director of Research for National Office Markets.

 

Essex office market sees “phenomenal” levels of investment

11th January 2017

The only way is Essex for office investors this year, after the county saw “phenomenal” levels of investment in 2016.

According to Savills, total sales volumes in the Essex office investment market tripled last year to reach circa £100 million.

The surge was driven by the strength of local office rents, as well as the continued popularity of Permitted Development Rights.

Rents rose to higher than £20 per sq ft (£215 per sq m) last year, pushed up by low levels of stock and a lack of new development. With prices relatively low in comparison to the nearby south east and Central London office markets, investors are taking advantage of the potential to generate strong returns as a result.

Indeed, the local market’s strength provides another UK commercial property alternative to London for investors, echoing the rise of Cardiff as a new office investment hotspot.

Notable deals highlighted by Savills is the sale of First Data’s 117,000 sq ft (10,869 sq m) headquarters on Endeavour Drive in Basildon to Maya Capital for £20 million, the £14 million sale of Regent House to developers Quinata Global and Boultbee Brooks purchase of Stone Cross in Brentwood town centre for £10.05 million.

Mike Storrs, associate director at Savills Chelmsford, comments: “Essex has seen a phenomenal amount of investment over the past year as investors continue to recognise the strength of the local market. The popularity of office to residential conversion through the Government’s decision to extend PDR has contributed to the upward trend in rental levels as there is now generally a lack of good quality space. Essex also remains a cost effective alternative to London and the County benefits from good road and rail links, particularly with Crossrail extending to Shenfield in 2018.”

“These conditions are unlikely to change as we head into 2017,” he adds.

 

Cardiff office take-up climbs to 15-year high

5th January 2017

Take-up of office space in Cardiff has climbed to a 15-year high, as the city becomes a Technology, Media and Telecommunications hub.

According to Savills, take-up for the year is on course to total around 670,000 sq. ft. (62,245 sq. m.), surpassing the 615,000 transacted in 2015 and 34 per cent higher than the 10-year average of 500,000 sq. ft..

The surge in take-up was fuelled by the city’s growing reputation as a TMT hub, with an above-average of large deals and pre-lets driving activity and volumes. Professional and legal services led the occupier mix, accounting for deals such as Hugh James 100,000 sq ft (9,290 sq m) pre-letting at 2 Central Square and HMRC taking 54,000 sq ft (5,016 sq m) at Brunel House.

Gary Carver, director in the business space team at Savills Cardiff, says that take-up was “exceptional” in 2016.

Demand for Grade A space also pushed rents up in 2016, with average headline rents rising by 14 per cent over the year from £22 to £25 per sq. ft., according to Savills.

“The city benefitted from many high profile deals throughout the year and the emergence of the city as a TMT hub. Looking ahead to 2017, One Canal Parade and 3 Capital Quarter are due to complete in 2017, reducing the demand pressure on Grade A space. The proposed 270,000 sq. ft. pre-let to HMRC in Central Square and two deals over 30,000 sq. ft., which are expected to complete in January, will ensure take up levels in 2017 remain at the same high levels we saw in 2016.”

Indeed, it is anticipated that Grade A rents will remain at £25 per sq ft in 2017.

Ross Griffin, director in the investment team at Savills Cardiff, comments: “The Cardiff investment market had a robust year in 2016 with the city being of interest to a broad cross sector of investors.”

Savills predicts investment into Cardiff offices will finally reach around £150 million for 2016, against £136 million in 2015, with overseas buyers taking particular interest in larger lot sizes such as 1 Capital Quarter, acquired by Golden Gate Capital, and the BT Data Centre, acquired by Keppell.

Despite a slower second half of the year, property companies and private investors remained active, but were careful in stock selection.The sale of The Levels on Capital Business Park, Cardiff, is an example of this; the high quality multi-let industrial estate provided both asset management opportunities as well as an attractive running yield for its foreign buyer.

 

Regional UK office take-up remains strong

28th July 2016

Take-up of office space in regional UK cities remains strong this summer, despite the looming shadow of Brexit.

Regional office occupier markets in the first half of 2016 have proven “relatively resilient”, according to new research from CBRE. Across the nine regional city markets monitored by CBRE, overall take-up in the first half of 2016 was 2.67 million sq ft. This is 14 per cent lower than the 3.09m sq ft taken in the same period of 2015, but is 3 per cent up on the average from the first halves of the last five years.

Nevertheless, there is significant variation across the UK. Some cities have had a very strong start to the year, whereas other have struggled relative to recent past performance. Cities with improved levels of take-up this year, when compared to 2015, include Bristol, Glasgow and Liverpool. Against each city’s five-year average, Birmingham, Edinburgh and Southampton can also be added to the list of cities performing above trend over the course of the last six months. In contrast, take-up in cities such as Leeds and Manchester has struggled to keep up with the very successful years these cities have seen since 2013. Leasing volumes in Aberdeen also remained subdued by the low oil price.

“With the timing of the referendum at the very end of the second quarter, it seemed unlikely that we would see the impact of the result on occupational activity in the first half data,” says CBRE, but adds that “concerns above the referendum itself, ahead of the vote, do not appear to have unduly deterred occupiers from continuing their searches for new space”.

“This is similar to the occupational impact of the Scottish independence referendum in 2014. Indeed for many occupiers, their searches have been initiated due to a forthcoming lease break or expiry.”

Demand for Scottish office space spreads out of key cities

24th May 2016

Demand for office space in Scotland is spreading out of the country’s key city centres.

Take-up of office space outside the central business district of Aberdeen, Edinburgh and Glasgow was 4 per cent higher in the first quarter of 2016 than the previous quarter, according to Savills’ Scottish Office Market report.

The move is being fuelled by a lack of suitable office space in the city centres, combined with rising rents. Indeed, out-of-town locations offer lower rents, with some places offering up to a 50 per cent discount on the £30 per sq ft prime rents available in the city centre.

“The out of town markets are on the cusp of experiencing a resurgence in popularity, particularly in Edinburgh and Glasgow,” says Mat Oakley, head of commercial research at Savills. “This is primarily due to occupiers being able to save money on rents compared to inner city locations.”

As a result, Savills predicts Scotland’s strongest rental growth could be seen in the out-of-town markets of both Edinburgh and Glasgow, where rents in the early £20’s could be achieved in the next three years.

Glasgow has seen approximately 300,000 sq ft (27,870 sq m) of space let in the first quarter of 2016 alone, more than half of the total amount of space taken in the city during the whole of 2015. Edinburgh, meanwhile, saw its second strongest quarter of leasing activity since 2013 in Q1 2016, (324,000 sq ft / 30,100 sq m).

According to the report, this spike in demand, combined with further employment growth and falling availability of Grade A space, has led to a squeeze in supply. Total supply in Glasgow has now fallen below two million square feet for the first time since 2011, with only approximately 500,000 sq ft (46,450 sq m) of Grade A space available. In Edinburgh availability has steadily fallen since its peak in 2008. Savills estimates that there is now only 2.1 million sq ft (195,100 sq m) of office space available across the city’s combined central business district and out of town markets, of which only 365,000 sq ft (33,910 sq m) is Grade A.

Scottish office investment volumes have stayed healthy, with just over £811 million transacted in 2015, one-third above the long run average, and just over £300 million transacted in Aberdeen, Edinburgh and Glasgow in the year to date.

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