黑洞社区

01 / Introduction

Manchester has long been one of the UK鈥檚 most vibrant cities. Its entrepreneurial spirit, thriving cultural scene, sporting excellence and prestigious universities all mean that it continues to attract people who want to live, work and study in and around the city. 

It鈥檚 no surprise that Manchester has also provided a wealth of opportunities for developers and contractors. With record levels of development across almost all sectors, 2018 was the most active year for a decade 鈥� the total number of schemes under construction increased by 34% compared with 2017, as reported in Deloitte Real Estate鈥檚 Manchester Crane Survey 2019. 

This is the latest stage in a long-term regeneration that is transforming Manchester from a post-industrial heartland into a modern, outward-looking urban hub. 

The residential sector continues to play a large part in Manchester鈥檚 ongoing rejuvenation. With the city-centre population ballooning from 10,000 at the start of the century to 70,000 in 2018, not to mention its record as the second-highest graduate-retaining place outside London, major residential projects have been emerging from the ground thick and fast. Demand shows no sign of slowing down in the short term, either. 

Manchester has done well to weather the storms of the UK鈥檚 uncertain economy over the past few years. With Brexit around the corner, Manchester must now emphasise that it is a global and European city despite the political situation and any exit from the EU. 

02 / Market overview

Last year, the number of residential units under construction 鈥� nearly 15,000 鈥� across the city was double that during 2016. The anticipated level of residential delivery over the next three years is due to exceed that for the entire previous decade. However, a crowded market means inflation is a threat: Aecom forecasts price rises of about 6% in central Manchester during 2019, dropping to 5% in 2020 and 2021, due to competition and a lack of major work package contractor availability.  

Looming market saturation for inner-city schemes means attention is shifting to major programmes around the periphery of the city as well as the redevelopment of industrial sites. 

The Northern Gateway Strategic Regeneration Framework, a joint venture between the city council and the Far East Consortium (FEC), will provide 15,000 homes over the next 15 years in one of the largest residential-led regeneration schemes in the UK. Plans to redevelop the old Mayfield industrial area near Piccadilly station, drawn up by the council and developer U+I, include a new 6.5-acre park, thousands of new homes and a hotel.

The community of about 100,000 students attending Manchester鈥檚 universities has been another driver of accommodation demand, with schemes such as the 55-storey Hulme Street tower for Student Castle, the Circle Square mixed-use development and a spate of other projects along the Oxford Road corridor all aiming to meet that need. 

Another major scheme, the 450,000ft2 Kampus in the city centre, is due to complete in 2019, taking the total number of rooms in the city centre to more than 10,000. Nevertheless, most student accommodation projects are mature, and if a Brexit-prompted downturn in international student numbers materialises, this buoyant spell may well come to an end.

03 / BTR as the most successful typology

黑洞社区 typologies and project characteristics vary widely across the city, and residential schemes are a mix of affordable and private-tenure apartments. Manchester鈥檚 build-to-rent (BTR) sector saw significant growth in the first decade of the 21st century, as a result of supply shortages and a lack of access to housing finance. While that boom was attractive to developers and BTR operators, standardised designs and issues around cost and quality have drawn some criticism. 

Programmes such as the Nationwide Foundation鈥檚 Fair Housing Futures will help to improve the situation for tenants, while the broader discussion will prompt developers and contractors to focus on providing service, support and facilities equal to or better than those currently on  offer, either within the BTR market or similar sectors such as student accommodation. 

Yet this BTR growth should not be surprising, as Manchester fits the profile for a good BTR location 鈥� broadly, a growing population with relatively stable employment, supported by decent transport links. Several major BTR projects in Ancoats, New Islington and Salford were completed in 2018. Many contain family-sized units, as opposed to the smaller units that many private rental operators have preferred to date. Some larger blue-chip developers are examining the idea of serviced apartments, depending on local demand and the location of places to work.  

The city鈥檚 pool of recently graduated students is also good for the sector. Recent graduates like BTR because of the management aspect (everything is taken care of), the community feel, the amenities offered and the flexible leasing arrangements if they want to move or travel. Even if international student numbers taper off because of Brexit, we still anticipate potential BTR growth from UK-based graduates who enjoy Manchester鈥檚 inner-city buzz and job opportunities.

There are advantages on the supply side too, particularly around contractors and developers working with BTR operators on whole lifecycle projects, as opposed to the short-term build-and-dispose turnaround of more traditional residential schemes. The asset strategy needs to be right 鈥� BTR projects must deliver stable income streams for 30 years or more, so quality should be embedded in projects from the start and designs should be sufficiently modern, flexible and energy-efficient to match tenants鈥� needs and amenity requirements. Post construction, low running costs for BTR schemes are essential to provide investors with the returns they expect over a development鈥檚 lifetime.

04 / Opening up brownfield

Manchester鈥檚 heritage means projects tend to be a mix of new-build and refurbishment of existing brick-built industrial buildings, especially in canalside areas. Many refurbishments are well-suited to house a combination of offices, start-ups and residential uses, with occasional ground-floor retail or food and beverage included to bring in income and establish a sense of community.

Brownfield sites offer a major opportunity. Brownfield is a key focus of the latest Greater Manchester Spatial Framework (GMSF), which will map out development potential for the next 25 years. Currently in consultation, with adoption planned for 2021, the GMSF includes eight target sites around the area and an objective to deliver an average of about 10,580 net additional dwellings a year by 2037, with at least 50,000 new affordable homes across a similar period. 

While the GMSF will provide an essential policy lever to make disused sites available, offering long-term investment potential for contractors and developers, it will not be a panacea. Brownfield schemes are, by their nature, challenging. Remediation or demolition may be required; design solutions need to work within the existing urban fabric; and logistics, neighbours and heritage all have to be factored in. Achieving viability can be difficult, especially compared with London, where unit prices or rents are higher, so getting the appraisals right from the start is essential.

Nevertheless, there is still a competitive edge to be gained by developers who may not have considered the residential typology before, especially in mixed-used schemes where light industry could provide a more secure rent than traditional ground floor retail. Through the co-location of light industrial spaces with housing, there are excellent opportunities to provide more homes and to create and protect jobs while retaining industrial activity and innovation, with the GSMF providing the means to stimulate investment 鈥� especially given its reduced emphasis on the greenbelt following previous consultations). There is potential for this new mix in areas such as Warrington, where Aecom produced the city plan in collaboration with the local authority.

05 / Frameworks and master plans

The integration of live and work space is not a new concept. Ever since David Dale and Robert Owen created New Lanark at the end of the 18th century and George Cadbury planned a 鈥渇actory in a garden鈥� at Bournville, Birmingham, 100 years later, planners have seen the benefit of combining affordable housing and employment with open spaces. In 2019, this integration of typologies can be achieved through a mix of uses within a building as well as within individual sites and across neighbourhoods. 

Developers and consultants interested in this approach may find useful closer engagement with national and local programmes to free up surplus land, such as the Homes and Communities Agency鈥檚 Accelerated Construction Programme. 

The fact remains that planning and policy frameworks deliver benefits only once they are approved and in operation. The GMSF has several rounds of consultation to get through before then, not to mention a mayoral election whose result may (or may not) send it back to the drawing board.

An earlier policy initiative, the much-maligned Northern Powerhouse strategy, continues to languish in good idea limbo. True, some of its innovations have been picked up 鈥� the Northern Powerhouse Rail programme is promising great things as part of Transport for the North鈥檚 comprehensive transport masterplan, for example. And those reading Theresa May鈥檚 UK industrial strategy will certainly recognise a few initiatives. 

However, the feeling of missed opportunity is hard to shake. What was an opportunity for cities in the North of England to work together to deliver real benefits has since 2016 become an isolated series of programmes, with projects such as Channel 4鈥檚 procurement of its new HQ emphasising competition rather than co-operation. 

06 / An infrastructure to drive investment

A strong residential market needs a good transport infrastructure. Manchester is seen as transport hub for the North-west of the UK, combining direct rail links from London with an airport that offers direct flights to all major cities in the UK as well as to many outside its borders. Trams, buses and local rail provide good standards of municipal transport. 

As the city continues to grow, its infrastructure will need to develop accordingly. Manchester airport鈥檚 拢1bn transformation programme is doing just that, upgrading its runways, customer service facilities and more than doubling the capacity of its second terminal. 

The second phase of the HS2 megaproject will connect Manchester with Birmingham, Leeds and London, while upgrading the city鈥檚 Piccadilly station. It will also act as a focal point for the 拢39bn Northern Powerhouse Rail (NPR) programme, which will put 1.3 million people within an hour鈥檚 train journey of Manchester, Leeds, Bradford and Liverpool. 

The potential of these programmes to unlock regional investment, in addition to their connectivity and capacity benefits, is substantial. HS2 will prompt further development in Manchester and have a positive knock-on effect for other towns and cities on its route. Transport for the North estimates that its transport masterplan, of which NPR is a part, could bring to the region as much as 拢100bn in economic growth and 850,000 extra jobs. Such growth will undoubtedly drive residential demand, creating a continued pipeline for developers, contractors and their supply chain in the coming decades. 

07 / About the cost model

The cost model below is for a medium-quality build-to-rent scheme located in central Manchester. The scheme is a multi-block project that comprises two residential towers (one of 29 storey and one of 23 storeys) that together provide about 480 units. The two towers are connected at ground level with a single-storey amenity space to accommodate a gym, a cafe, a residents鈥� lounge and meeting rooms, as well as a basement that reflects the full footprint of the superstructure above.  The gross internal area of the scheme is 43,081m虏 (463,715ft虏) and the net internal area 31,146m虏 (335,255ft虏). 

All costs in the model 鈥� for both materials and labour 鈥� are current at the second quarter of 2019 and are based on a Manchester location, for a project using a design and build arrangement. 

The cost model excludes demolitions, any main contractor鈥檚 first-stage or pre-construction fees and contractor鈥檚 post-novation design fees. The estimate also excludes: furniture, fittings and equipment (FF&E); operations and services equipment (OS&E); section 106/278 agreements and VAT. The amenity space is included in the costs for the shell and core but not covered in terms of fit-out.

The purpose of the cost model is to reflect construction cost only and development cost.

The rates may need to be adjusted to account for specification, site conditions and constraints, procurement route and programme. 

Download the cost model using the link below