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North West Commercial Property News - Friday, October 5, 2018

Issue #85

SPACE....the final frontier

While the political classes and southern based establishment agonises over the effect of Brexit, the North West appears to be singing to a different and more optimistic tune.

That appears to be the message coming from Manchester where the strong city centre offi ce performance continues and shows no sign of slowing even though it has been a decade long process.

What is also special is the size of the deals, such as Booking.Com taking 20,446 sq metres (220,000 sq ft). Equally as important is that it is a tech company of the sort every city wants.

Chris Mulcahy of JLL said: “This year could set another record for the city centre after the fi rst half saw take-up of over 65,955 sq metres (700,000 sq ft) and continue the sequence of the past 12 years. We don’t see any easing of demand particularly as companies are upgrading their space requirements partly because of from the workforce."

Manchester continues to press its case as a vibrant international city, a theme consistently promoted at the MIPIM property show every year.

Launching its MIPIM programme for 2019, council leader Sir Richard Lees said: “Next year will be a refl ection of the progress Greater Manchester has made as an internationally developing city, and will also be an opportunity to discuss how Manchester can progress over the next 20 years."

To put it in context, last year 108 companies and 250 delegates represented Great Manchester at MIPIM in one of the largest participations by a UK city.

To some extent the spirit of Manchester is illustrated by the translation of successful footballers Gary Neville and Ryan Giggs into developing landmark structures in the city.

The St Michael’s mixed-use scheme has been given the green light for development after some changes to the design.

Neville said: “It’s been more than a decade since the idea to regenerate a strategic city centre location was fi rst considered-and our team is pleased we can focus on delivering the project for Manchester, bringing a new high-quality development that will enhance the city’s position both nationally and internationally."

Sir Richard Lees added on the £200 scheme that: “Investment in Manchester is crucial to support our on-going regeneration and St Michael’s is a case in point of high-quality development."

One of the important aspects of the regeneration of Manchester is the substantial expansion in the amount of housing in the centre.

This has transformed the urban scene by bringing in young people and their demands for a whole range of services.

The latest major scheme is by Prosperity Capital Partners for the Boddington’s Brewery site close to Manchester Arena and Victoria railway station, as well as the big Co-operative development.

The £175 million project is a 556-home mixed-use scheme to be called Old Brewery Gardens will also have substantial retail and commercial space on the site of a car park.

The buildings will be clustered around a communal garden at the heart of the scheme (which has been designed by Assael Architecture) which will also occasionally be used as an open air cinema.

Ed Fowkes of Prosperity Partners said: “Such a large project with a diverse offering for both residents and the local community, will make a signifi cant contribution to a Manchester that continues to thrive culturally and economically.

We understand that a catch-all housing solution won’t cut it for the booming regional cities and to continue growing, they need top drawer housing.”

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Everton MINTED

Everton Football Club has leased 2,604 sq metres (28,000 sq ft of refurbished space in the landmark Royal Liver building.

Its marketing, fi nance people’s services and communications teams have moved from Goodison Park, the home of the football club for the past 120 years.

Professor Denise Barrett-Baxendale, chief executive offi cer of Everton, said: “As a football club and heritage institution, we contribute a lot to the rich tapestry of the city’s business community, Our relocation to the Royal Liver building brings us into the heart of our commercial district which will be a big benefi t to the club and our staff."

She added that “this move comes off the back of the club making the Sunday Times 100 best companies and is just one of the example of how through our People Strategy, we are continuing to invest in our people.”

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EYES peeled

One useful guide to the improvement in Liverpool in the past few years has been the strong performance of the residential property market which has underpinned the increase in commercial activity.

The numbers for residential illustrate a major recovery with growth of 124 per cent in the past fi ve years and should soon reach the annual value of £1 billion, reported Search Acumen.

Such a performance has helped bring forward mixed-use development in the city centre with average prices rising 16 per cent in the past fi ve years, bringing a sense of well-being among buyers. The rise in activity coincides with the Liverpool becoming one of the fi rst cities in the UK to digitise its Local Land Charges register, expediting the process of buying and selling property across the city.

Andrew Lloyd of Search Acumen commented: “The Liverpool property market has boomed over the past fi ve years and by becoming one of the UK’s fi rst cities with access to the digitised and centralised Local Land Charges register, investment in its property market could be set to grow even further. The digital switch will be welcome news to local residents, businesses and investors.

The digital move will add to the steady performance of Peel’s EYES peeled Liverpool Waters scheme where Romal Capital has now completed the streel structure of the Quay Central building with the Central Dock neighbourhood. It has 108 apartments and 600 sq metres (6,456 sq ft) commercial space on the ground fl oor.

This is only part of the ambitious Liverpool Water project by Romal and Peel have planning consent for 2 million sq metres of space (21.5 million sq ft).

Gregory Malouf of Romal said: “Being the fi rst scheme to commence in Central Dock is something we are proud of, and I can say from experience that I have not come across any other project that is on a similar scale or ambition to Liverpool Waters. Not only will Quay Central benefi t from having such a vast array of business, residential, leisure and entertainment facilities nearby, it also has the advantage of being placed at a prime location on Liverpool’s waterfront.

The strong selling point for Liverpool Waters is the quality of the Peel development, such as now planning to develop a district heat network with the fi rst part of the scheme around Princes Dock. It will be operated by a new Peel subsidiary, Mersey Heat, which will be responsible for the system design and construction of generating plant.

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TAKING Stockport

Although the serviced offi ce market continues to grow strongly some property professionals are concerned that the business will work against the interests of the traditional owners.

There is some concern about the rapid expansion of WeWork in taking buildings, such as now the former KPMG building at Dalton Place, Manchester.

Mark Canning of Canning O’Neill suggests that the expansion of such companies as WeWork could undermine the stability of the offi ce rental market by cutting rates. This may take some time to work through he feels but it nevertheless is a disrupter.

As far as Manchester is concerned “there is still plenty of confi dence and the market continues to perform”.

He particularly notes the rise of Stockport as a favoured location, notably the development of the Stockport Exchange. “There is a lot happening in Stockport and it has always been a good location in south Manchester,” Canning added.

As it happens Canning’s comment about serviced offi ces coincides with a report from Instant Offi ces about the market. It said: “The sector has already disrupted the conventional real estate market with tremendous global growth and become one of the biggest stories in property over the last decade. Supply of new space in the UK has seen consistent double-digit growth over the last fi ve years as more companies than ever choose fl exible space over conventional offi ces."

The report said that: ”Last year saw an explosion of centres in regions outside London, particularly in the North West and the Midlands. Activity is also strong in the regional hubs of Manchester and Leeds and smaller regional hubs like Cardiff, Liverpool and Newcastle are seeing growth levels above 10 per cent."

John Duckworth of Instant Group commented that: “Smaller operators cater for a unique but growing segments of the market, such as specialist TMT space or women-only centres.”

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InBrief #1

Allay Claims has leased more space at the Parks in Haydock through JLL which leaves just two vacant small units to let.

Richard Wharton of JLL said: “The value provided by the quality refurbished offi ce space in a well - connected out-of-town location continues to drive strong demand from occupiers. “The park has a total of 11,152 sq metres (120,000 sq ft) at Haydock near Warrington.

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BARING gifts

The transformation of the Manchester City centre, which took a giant step forward with Allied London’s Spinningfi elds, is progressing with the development of St Peter’s Square.

The latest building, Landmark Manchester being built by Barings for an institutional investor, is visible with the completion of the concrete core for the 1t6,728 sq metres (180,000 sq ft) building which is due for co0mpletion in summer2019.

Designed by Squire & Partners, Landmark has been constructed with an offset core to enable large and effi cient fl oorplates.

According to Barings, it fi ts into a market currently experiencing strong demand coupled with limited supply. Landmark is only one of two new build offi ce developments to be completed in Manchester city centre next year and it will complete Manchester City Council’s vision for St Peter’s Square and the Civic Quarter.

Charles Weeks of Barings commented: “Manchester is thriving. It is consistently one of the strongest, most active city centre offi ce markets outside of London. Landmark will play a pivotal role in what the city has to offer by providing businesses with a destination that is both modern and fl exible.”

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CROWN allegiance

Allied London with its decade long view of development has taken another step in the broadening of Spinningfi elds with the opening of Crown Square and the Oast House.

It has been designed by the Spanish architects Arriola & Fiol to build a story around the historic Oast House with the design taking inspiration from European plazas where socialising and relaxing outdoors forms a central part of everyday life.

A new feature of the square is a permanent stage and outdoor bar area. David Drews of Allied London said: “It offered a rare opportunity to use landscape architecture to showcase the relationship between the Oast House and Spinningfi elds which is one that focuses on a careful juxtaposition of marrying heritage-style space with the modern clean lines of Spinningfi elds.”

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Parklife Birchwood

Birchwood Park continues to forge ahead and has proved its attraction with a raft of new occupiers.

Patrizia, the asset manager, said there had been 15 new lettings of small offi ce suites in the park since the start of the year bringing the total for the year to 511 sq metres (5,500 sq ft).

The main point is that small companies grow and will need more space in the future at the park.

Recent new occupiers are high technology companies, such as radiation shielding and criticality safety specialists, Cerberus Nuclear, setting up the fi rm’s fi rst offi ce at the heart of the Birchwood Nuclear cluster.

The company’s Stewart Hay said: “Birchwood Park is a focal point for the UK nuclear industry-as a new business in the sector we knew this is where we needed to be."

The home adaption specialist Access Able and recruitment to recruitment business William Glyn have also moved to the park in recent months, both citing a central North West location with excellent transport links as a deciding factor.

Linda Welsby of Birchwood Park said: “We’re seeing a real depth in the range of businesses wanting to set up a base in the region-from start-ups and SMEs, to large corporates. It is a measure of how attractive a proposition the North West is as a location, and the vast opportunities for growth here in Birchwood."

The strong demand for space has led to the park getting three additional offi ce suites at Chadwick House. This year the park celebrated 20 years of growth.

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Stoked UP

The regeneration of Stoke-on-Trent has taken a step forward with the start of construction of a 140-bedroom Hilton Garden hotel.

It is the fi rst Hilton branded hotel in Stoke, a city famous for its potteries, and is being developed by a partnership of Genr8 Developments and the city council and is scheduled to open in late 2019.

The new hotel is part of the £170 million Smithfi eld project which is set to deliver 92,937 sq metres (1 million sq ft) of offi ces, leisure, retail and residential space n a new quarter of Hanley, one of the fi ve towns of the potteries.

Richard Ingham of Genr8 said: “Our decision to own as well as develop the new hotel signifi es our confi dence in both the Hilton brand and the demand for a new quality hotel in the city centre. Stoke is a city on the up and the new hotel will be an important addition for both the business and tourism industries in the region."

Ccll Ann James said: “This hotel is another clear indicator that the city is changing for the better. We need more hotel accommodation in the city centre if we are to develop as a progressive, vibrant city and when you Stoked UP compare us to places of a similar size, it has been an area where we have fallen short."

Stoke has made a major effort to develop its cultural centre and has a thriving museum with a world-class collection of ceramics. It also has a number of museums associated with the pottery industry, such as Wedgewood, that attracts tourists.

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Premier IN

In its latest half yearly review of the hotel industry, Christie & Co said the market has been enjoying” a stellar period as one of the few sectors to fully benefi t from the response to the EU referendum.

This has been underpinned by the increase in tourism because of the decline in the value of sterling which boosted the number of arrivals from overseas to 39.9 million last year, an increase of 6.2 per cent on 2016.

Sustained consumer demand has resulted in an increase of 19,000 hotel rooms in 2017/18, according to AM:PM. In turn this brought in increased numbers of investor and “an unparalleled variety of buyers from across the globe, showing that international interest in the UK has not slowed”, said Christie.

Demand for quality hotels remains high, but also competitive, which is refl ected in higher sale prices.

“Big ticket transactions are becoming increasingly frequent, said Christie, “with investor appetites clearly geared towards more substantial deals,” In the second half London alone is due to have 9,000 new hotel rooms and there has been an improvement in the rate of return on each room in the regions, where many new hotels are also being built, such as Liverpool, Manchester and Stoke.

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Within BREXIT

The construction industry has experienced a variable year in terms of performance, which has brought some concern about its ability to meet all the needs of the UK economy. Blane Perrotton of Naismiths said: “After a turbo charged summer, the ship has steadied and an uneasy calm is returning to the construction industry. July’s mini explosion in both output and sentiment was an expression of pent-up demand rather than a permanent turn-round. With the Brexit storm clouds still looming on the horizon, the current modest progress is as much as can be expected.”

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