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Manchester

Manchester Office Vacancy Rates will Peak at 14% by end of Quarter One 2009 forecasts Jones Lang LaSalle

Although decline in speculative development will help diminish existing supply in longer term


Manchester, 12 February 2009 – Manchester city centre take-up finished strongly in 2008 although tougher market conditions are expected to continue to impact on occupier activity this year which means a higher likelihood of vacancy rates increasing in the short term according to Jones Lang LaSalle’s Manchester Offices Research Report, Quarter 4 2008.

“Activity in 2008 was broadly consistent with that seen in 2007 suggesting that Manchester’s occupier market has been slower to feel the effects of the economic downturn,” said Trevor Sloan, Director of Office Agency in Jones Lang LaSalle’s Manchester office.

Jones Lang LaSalle’s research shows that total available space in Manchester city centre now stands at 2.6 million sq ft, with over 450,000 sq ft of speculative space due to complete during the first three months of 2009; the equivalent of 1.7 % of existing stock. In the second half of the year this drops sharply, with only 107,000 sq ft of new space to come onto the market. The completions, combined with an increase in occupiers placing space back on the market, means that vacancy rates are predicted to peak at close to 14% by end of Quarter 1 2009.

Trevor Sloan added: “The deeper downturn in the UK and global markets has meant that occupier conditions have dramatically deteriorated which has meant a reduction in the level of new enquiries across all occupier sectors.  Arguably, the threat of oversupply is now very real, although with prime Grade A vacancy rate currently at 3.5%, any increase in city centre supply will come off a low base.”

Whilst the outlook for Manchester’s office market this year is challenging, there remains a strong element of historical demand and it is anticipated that a churn of medium sized deals, predominantly in the 10-50,000 sq ft bracket, will continue to contribute to take-up volumes. Demand could also be triggered from the 1.2m sq ft of office lease breaks or expiries which are due to take place over the next 24 months.

During the second half of 2009 and 2010 Jones Lang LaSalle forecasts that a sharp decrease in speculative space being delivered will allow the market time to absorb the excess of supply and result in more favourable market conditions emerging in 2010.

Trevor Sloan concluded: “Our view is that the existing supply will be depleted over the next 24 months and subsequently, as the choice of good quality space dries up, developers will have to revert back to a pre-letting marketing over the same timeframe. The main risk to the market is a more prolonged recession and with current economic conditions continuing to decline we will continue to regularly monitor developments closely.”
 
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Notes to Editors:
For a copy of Jones Lang LaSalle’s Manchester Offices Research Report, Quarter 4 2008 please email cathrine.harrison@eu.jll.com