黑洞社区

In 2019, the last time that 黑洞社区 took an in-depth look at Manchester鈥檚 real estate market, analysts speculated that the city鈥檚 long residential boom could be cooling and that the commercial office could be the next growth market. A lot, you may have noticed, has changed since 2019.

Through three years of lingering pandemic and on-off lockdowns, that slowdown in residential construction never materialised, maintained by strong private rental demand. In the office market, by contrast, it has been a bewildering few years as employees, occupiers, landlords and developers adapted to the brave new world of home and hybrid working.

Stubbornly low occupancy rates make it clear that we have entered a new paradigm in how offices are used, although the exact levels of homeworking in the UK remain unclear 鈥� a PwC survey taken this spring claimed that 66% of UK employees worked either fully or mostly remotely, while an ONS report, published around the same time, recorded a much lower 38% as having worked from home at some point during the previous seven days.

Amid the uncertainty, levels of new office building in Manchester have wavered. According to Deloitte鈥檚 crane survey, a relatively small 400,000ft² was delivered to the market last year 鈥� 66% down from the 1.2 million ft² completed in 2020 鈥� although levels are expected to rebound somewhat, with 740,000ft² due to complete this year and 580,00ft² in 2023.

But while the picture remains hazy at the aggregate level, Richard Wharton, director of JLL鈥檚 Manchester office, says individual firms are beginning to understand their own needs and are getting ready to move in the market. 鈥淗aving now had six or nine months since covid, you鈥檝e got a bit of a pattern as to what staff want to do, what the business or corporate line is,鈥� he says. 鈥淪o we can say, 鈥榌鈥�] we are in 20,000[ft²] and actually we think we can get away with 14,000[ft²]鈥�, so hence we can make a decision, we can go to market and we know what we want.

鈥淚 think they just wanted to see this period where they could sort of trial it, see what works, and then make a decision based on a bit of empirical evidence,鈥� he adds. Early in the pandemic, there was speculation that the new working paradigm could result in a mass-downsizing. But, as time has gone on, that analysis has become increasingly simplistic.

Firms are beginning to realise that to coax employees back to the office, the office itself has to change. During the pandemic, the homes of many workers became much more like their offices, but now developers realise they must make the office as comfortable as the home.

In many cases this means occupiers need more space rather than less, as they seek an edge in the amenity arms race. As Wharton says, 鈥渋f you鈥檝e not got a cycle store and a shower block in your basement these days, you鈥檙e not in the market鈥� 鈥� and indeed many have gone much further. The Alberton, Bruntwood鈥檚 planned 18-storey office block by Manchester Canal, is set to feature the highest swimming pool in a UK office building as part of a rooftop holistic wellness centre.

[Developers] are going to see these returns in less tangible ways than just rent 鈥� they鈥檙e going to see it in occupancy and in happy, vibrant buildings

But developers are now having to go beyond amenity and try to foster a sense of organic community around their office developments, something that has been an emphasis for Bruntwood in Circle Square, MEPC in Noma and Downing in First Street. 鈥淭hose little districts I think will all try to incorporate that sense of 鈥榯here鈥檚 a bit more going on here than just a sterile office district鈥�. It will be a lifestyle place with leisure and retail and amenity and bars and restaurants and that kind of thing,鈥� says Wharton.

Deloitte partner Simon Bedford, who leads the firm鈥檚 regional development business from Manchester, agrees. 鈥淚 think the days of just having sort of an office quarter are gone,鈥� he says. 鈥淭he days of being part of a particular neighbourhood in the city 鈥� that is something that people are more attracted by, with interesting ground-floor uses, with great public realm, preferably without cars.鈥�

In many ways, these new commercial neighbourhoods are doing in the centre of Manchester, what had been done out in Salford Quays at Peel Media鈥檚 MediaCityUK. Last month the developer lodged plans for another large office block in the development, designed by Sheppard Robson.

Reacting to these changing occupier demands quickly is going to be crucial for developers looking to make their scheme stand out in a competitive pack. Peter Gallagher, consultant for Colliers, NOMA鈥檚 commercial agent, says that this project has been 鈥渨holly driven鈥� around the idea of creating a 鈥渃ommunity of use鈥�.

The client on 4 Angel Square, a 22,000m² office building in NOMA expected to complete early next year, agreed to take a large part of the ground floor, which could have been an income鈥慻enerating commercial space, out of the lettable space to be used for a range of occupier activities. Revised proposals for 2 & 3 Angel Square are currently being considered by Manchester city council.

The scheme had originally been granted planning consent in 2019, but shifting trends forced a rethink, with the building redesigned for better integration with outside space and larger areas of the building repurposed for wellbeing activities. 

鈥淒evelopers like to see a return on their money, and they are going to see these returns in less tangible ways than just rent 鈥� they鈥檙e going to see it in occupancy and in happy, vibrant buildings,鈥� says Gallagher.

He adds that large, campus-style developments like NOMA have a natural advantage in such placemaking endeavours, as they can curate the space between the buildings in a way that is not possible with individual office blocks.

The buildings that these companies occupy now are very visible signs of where they are in the whole debate on carbon.

One of the major drivers behind this community agenda is the need for corporates to win the battle for talent. A modern, flexible office space in a vibrant and energetic neighbourhood remains a draw for young talent, which has never been in higher demand.

Says Gallagher: 鈥淚t鈥檚 probably an unpopular thing to say, but the employee has the whip-hand at the moment. They can choose where they want to work, and if they don鈥檛 like it, they can choose somewhere else quite readily.鈥�

By and large, they are choosing thriving cities like Manchester. Many corporates are drawn to the city because it has the highest student population outside London, more than half of whom remain in the city after graduation 鈥� once again, a statistic second only to London.

鈥淭hose graduates want to live and work in the city centre,鈥� says Wharton. 鈥淭hey don鈥檛 particularly want to live out in the sticks and have to commute or drive out and drive back in 鈥� they want to live in Ancoats, work in Spinningfields and go get [drunk] in Castlefield.鈥�

Despite the draw of the bright lights, demand remains strong in historically popular office hubs on the periphery of the city 鈥� places such as Wilmslow, Knutsford and Altrincham. Sheppard Robson partner Tony O鈥橞rien, who leads the practice鈥檚 office and residential projects from its Manchester office, speculates that banks and legal firms, which have a lot of staff working from home in the commuter belt, may begin to opt for smaller, more flexible spaces closer to these towns.

The competition among corporates for new recruits is also helping to drive competition among office developers to out-green and out-clean one another. According to Gallagher, recruiters are routinely being grilled by prospective employees about the ESG policies of companies, with major consequences for the built environment.

鈥淭he buildings that these companies occupy now are very visible signs of where they are in the whole debate on carbon,鈥� he says. Many companies have made statements to their shareholders committing to net zero, and according to the climate change committee, direct greenhouse gas emissions from buildings accounted for 17% 鈥� that鈥檚 without taking into account embodied carbon.

鈥淲here you have an office, that is going to be crucial to achieving those commitments that you鈥檝e made to the stock market,鈥� says Wharton.

When the Co-operative Group moved into One Angel Square in NOMA in 2013, it was one of the most sustainable large buildings in the world. Now there are a plethora of planned and completed developments across Manchester 鈥� Landmark, No.1 Spinningfields, New Bailey, Circle Square, First Street and the most recent developments at Angel Square 鈥� all being developed to BREEAM Excellent standard or better, all jostling to outcompete one another on their green credentials. 

This flight to quality could be good news for the refurbishment and retrofit market, as landlords of older developments seek to avoid being left behind. Deloitte鈥檚 Bedford says: 鈥淢anchester鈥檚 always had a very strong refurbishment market in the office sector.鈥� He adds that much of the work in recent years 鈥� such as Bruntwood Works鈥� Bloc development, which features a living wall and wildflower roof 鈥� has been focused on improving sustainability.

There do, of course, remain headwinds, with rampant inflation impacting building costs and fears of a recession on the other side of the new year. But, in Manchester鈥檚 office market, at least, there is confidence in the sector鈥檚 ability to weather these challenges.

鈥�2023 particularly could be a very difficult year to navigate in that context,鈥� says Bedford. 鈥淏ut, over a longer period, we have to assume that inflation will not be a feature of our economy, in the way in which it was 30 years ago. In that context, I think I think we would expect to return to what has been a very strong period for a regional city like Manchester.鈥�