2022 FORECAST
Manchester
- The city’s economy rebounded strongly in 2021 – the second fastest of the largest European cities. During 2022, economic growth is forecast to be 6.5%, compared to a pre-covid average of 3.4%.
- The city continues to attract vibrant, growing businesses. Roku’s acquisition of 110,000 sq ft is its first office in the UK, and without any employees in the city prior to commitment.
- Relatively robust levels of new demand and limited grade A supply will help underpin rental growth and underpin prime rents at the top end of the market. However, as a whole, the market has more available space than at any point over the last five years which will drive greater bifurcation.
- Manchester stacks up better than other regional cities, but with 89% of its office stock lower than Grade B, there will need to be a great deal of refurbishment in a short period of time in order to meet policy requirements; and even more to cater to evolving occupier demand.
- The North West has seen unprecedented levels of industrial and logistics demand during 2021 which has driven prime rental growth of circa 15% over the last year.
- Manchester and Greater Manchester’s housing markets saw significant price growth and activity during the course of 2021. While we expect transaction levels and price growth to moderate, they will remain strong relative to pre-pandemic levels,
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Economy
Offices
Retail
Industrial
Residential
Economy
2021 saw Manchester’s economy grow the second fastest of the 30 major European cities, growing by 8%. During 2022, Manchester’s economy is predicted to grow by 6.5%, compared to a ten-year pre-covid average of 3.4%. This will be driven by a rebound in the sectors which were hardest hit during the pandemic. These include Accommodation and Food Services (29.3%), Arts and Entertainment (16.2%) and Education (9.8%). The city’s professional, scientific and technical services will continue to power the economy in the short- to medium-term. According to the City’s inwards investment agency, MIDAS, Manchester saw £314 million of inbound investment, of which £99 million was from professional firms.
The city’s youthful employment pool continues to be resilient, with the numbers in employment expected to increase by over 10,600 jobs to 449,000 – a record level of people employed for the city. 4,600 of these new jobs are expected to be traditionally office-based jobs. The professional, scientific and technical services sector is forecast to see 1,700 new jobs created in 2022.
Politics in the city is seeing a shift, with Sir Richard Leese being replaced by Bev Craig who is likely to put an increasing focus on delivering social value across the city. The city’s ability to deliver new space across all sectors is likely come under pressure over the next few years as a result of build cost increases and greenflation. However, this is not just applicable to Manchester, and the city continues to reinvent itself across a number of sectors.
Under the UK government’s revised Integrated Rail Plan, Manchester Piccadilly remains on the HS2 route which will run through to Crewe and Manchester Airport. The revised plan also commits to a high-speed line between Manchester and Warrington, and the electrification and upgrading of the Transpennine Main Line.
Significant amounts of development and regeneration in the area will take place outside of Manchester itself. Stockport’s decision a year ago not to sign up the Greater Manchester housing and growth masterplan – now Places for Everyone – will mean that the council needs to continue to work on its own Local Plan, with a deadline for 2023. However, the success of the town in securing investment for development continues to act as a blueprint – albeit one not easily recreated – for other Greater Manchester towns.
MANCHESTER DASHBOARD – ECONOMY
Offices
Demand for space in the city continues to be robust – if slow-moving - across a number of sectors. Nevertheless, a strong end to the year saw Manchester city centre surpass 1 million sq ft of take-up for 2021, just 10% down on the ten-year average.
Similar to other cities, there has been a healthy proportion of grade A take-up. Of particular interest is the growing tech sector in the city, with Roku and Cloud Imperium both committing to grade A space and due to occupy space during the course of 2022. Roku’s acquisition of 110,000 sq ft at Circle Square is its first in the UK – and without any employees in the city; while Cloud Imperium are relocating from Wilmslow and are expected to bring 700 jobs to the city during the course of 2022.
Landlords are evolving to create a more diverse offer. Demand for flexible office space is likely to increase during the course of the year, with new entrants Hana and Huckletree relatively new to the market, while Bruntwood and CEG are offering Plug and Play space in order to reduce voids and cut rent free periods. The city is seeing a number of buildings that have investment put into the ground floor offering – in the forms of cafes, collaboration space and wellbeing facilities.
Relatively robust levels of new demand and limited grade A supply will help underpin rental growth in the short term and underpin prime rents at the top end of the market. However, as a whole, the market has more available space than at any point over the last five years which will drive greater bifurcation.
MANCHESTER DASHBOARD – OFFICES
Retail, Hotels and Leisure
Manchester’s retail offer remains as good as anywhere else in the country, but like other major cities has seen an increase in vacancy over recent years and is struggling to capture its pre-covid footfall numbers. Vacancy for the city centre is at 17%, falling to 10% for prime space. The city continues to attract retailers across a broad spectrum of offers with new offers from Kick Game, The Range, JYSK, Tommy Hilfiger and Pretty Green during the course of 2021. After years of significant falls in value, rents are expected to start to plateau in the city.
Construction is expected to commence on the UK’s first city-based wellbeing resort at Trafford Park in Manchester. Therme Manchester, a 28-acre site, will include indoor and outdoor swimming and leisure facilities, botanical gardens, and a range of swim-up bars, therapeutic pools, and wellbeing activities. Peel have also gained planning permission for a surfing centre, retail, restaurants, and other leisure activities. When all of these new facilities are complete, Trafford Park is forecast to attract up to two million visitors each year, solidifying its reputation as one of the top retail and leisure destinations in the UK.
Manchester’s hotel offer continues to evolve, with the city due to see the most number of new openings outside of London during the course of 2022. This will include the 275-room Leonardo, a 329 room Clayton, a 278 room leisure-focused Maldron hotel and a new 330 room Motel One. This is in addition to a number of new openings at the airport.
The city has shown an ability to absorb new supply historically. Big cultural events, sports and the strength of the local corporate sector all play a role in this and make Manchester a ‘must have’ market for investors. Zetland Capital (Macdonald acquisition) and Tristan Capital Partners (Qbic) both purchased trading assets in 2021.
Institutional investors still have confidence and appetite in Manchester when opportunity presents as demonstrated by Landsec’s MediaCity Premier Inn deal. We expect there to be significant activity across both prime development sites and trading assets during the early part of the year.
MANCHESTER DASHBOARD – RETAIL
Industrial
The North West has seen unprecedented levels of demand during 2021 which has driven prime rental growth of c.15% over the last year. Take up of large industrial units in the region totalled over 4.9 million sq ft, almost 75% higher than in 2020. The largest occupier was L’Oreal, who occupied a 900,000 sq ft unit in Heywood. This momentum is expected to slow in 2022, driven by a lack of available stock and a squeeze on land supply. The strong demand is driving increases in land values in Manchester, where they have reached £2 million at Trafford Park.
In the occupier market, The Perfume Shop has agreed to lease a 191,000 sq ft speculative logistics warehouse at Metro 190 and are scheduled to occupy it in the summer of 2022.
As of Q4 2021, only 1.1 million sq ft of space was available across the region, highlighting the lack of supply in the region Pipeline space should increase throughout 2022 to meet high levels of demand. National Grid has recently launched the sale of a large 43 acre development site in Carrington which has the capacity for more than 400,000 sq ft of industrial space.
MANCHESTER DASHBOARD – INDUSTRIAL
Residential
Manchester’s housing market was one the strongest performing among the UK’s urban areas in 2021, in terms of price growth and activity. The Greater Manchester area performed even better, with price growth ahead the rest of the UK. In line with the wider prevailing trend, properties with private outdoor space, or a high level of communal amenity have seen the most demand. We expect this trend will continue into 2022 and while we expect transaction levels and price growth to moderate, they will remain strong relative to pre-pandemic levels.
Manchester’s PBSA sector remains highly sought after by investors. A relatively restrictive planning environment has limited supply and this is set against a backdrop of strong student demand. This demand is underpinned by Manchester’s strong higher education offering and reputation as a young and appealing city to live in for students. Accordingly, we have seen yields compress in 2021 and believe they could well sharpen further in 2022.
The city’s Build to Rent sector is similarly well underpinned, albeit with some concerns from the investor community around oversupply. Manchester has around 45% of its population under 35 and the highest student retention rate after London. This demographic story is key to driving the success of the sector and is also behind the emergence of co-living schemes in the city’s pipeline. Manchester will be one of the UK’s leaders in this sector.
BtR opportunities will continue to attract a lot of investor attention in 2022, particularly in prime locations and as with the wider market we expect an increased focussed on suburban schemes. Manchester’s lack of affordable housing supply is a constraint. The city will see an increase in supply from for-profit registered providers. The deal done at the end of 2021, for L&Q – through Trafford Housing Trust – and FEC to deliver 128 new homes as part of the Victoria Riverside development is hopefully a sign of things to come for increasing investor demand in the sector.
MANCHESTER DASHBOARD – RESIDENTIAL
2022 Forecast Manchester Digital Event
Watch our recent live event, where we brought together a series of experts to explore the key drivers and predictions for Manchester in the year ahead.
Broadcast Thursday 27th January
