New figures have suggested that office rents in Manchester city centre could hit a new record by the end of 2015. This has prompted property consultant Simon Morris to ask whether Manchester is a viable commercial property investment alternative to London.
Businesses are flocking to rent office space in the UK
The UK is a desirable place to set up a business. The nation’s GDP grew at a rate of 2.6% in 2014; this was the highest rise, according to the BBC’s GDP tracker, since 2007.
This is good thing for property investors. It means that businesses are flocking to rent office space throughout the UK. This ensures that property investors have a high chance of generating significant long-term revenue by ploughing their capital into office property.
There are UK office hotspots beyond London
London is seen as the traditional beneficiary of rising office rents. The UK capital is a global economic hub and boasts one of the most prominent finance industries in the world. As was previously reported on the Simon Morris blog, tenants took up a record 2.4 million square feet of office space in London in the first quarter of 2015.
However new research by national commercial property consultancy Lambert Smith Hampton (LSH) showed that there are viable alternatives to the UK capital. The consultancy’s annual Office Market Report for 2015 showed that Greater Manchester was the best performing of six UK office markets outside London in 2014.
The report showed that 2.1 million square feet of office space was letted out in Manchester in 2014. This is the city’s best performance since 2001. The report also predicted that office rents in Manchester city centre could reach £35 per square foot by the end of 2015.
“General investor and developer sentiment in the market remains strong.”
Josh Levy, associate director in office agency in LSH’s Manchester office explained how the sector may grow in 2015. He was quoted by the Manchester Evening News saying: “During the last cycle we saw headline rents of around £28.50 per square foot, in this cycle we are already seeing between £30-31 being achieved through pre lets.
“The general investor and developer sentiment in the market remains strong and we are seeing landlords looking at asset management solutions to attract occupiers and in one prime space in the city centre we are currently seeing £33.50 being quoted.
“Confidence in the market is going to continue and there is a belief that rental growth will continue across Grade A and also in buildings providing substantially refurbished space where demand also remains strong.”
Is Manchester a viable alternative to London?
This suggests that the Manchester office market will continue to grow in 2015. Does this make it a viable alternative to London?
Maybe. Both cities’ office markets look set to expand over the course of 2015. More than anything, this news indicates that there are more options for investors who are looking to plough their capital into office property. If they do their research and read Simon Morris’ 2015 guide to property investment, investors can choose the office market that’s right for their circumstances.