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News Release

Manchester

Manchester Will Be Just Ahead of UK Overall Growth in 2012

Jones Lang LaSalle says city and region ‘well placed to ride economic storms’


Manchester, 18th November 2011 - Despite the pressing threat of the current Eurozone debt crisis, Manchester is set to be just ahead of the UK in overall growth terms next year, with the North West slightly behind, predicts Jones Lang LaSalle in its UK Economy & Property Outlook presented to the North West’s financial and property community in Manchester.

According to Andrew Burrell, Head of Forecasting at Jones Lang LaSalle, regional growth will recover in line with UK performance and all property markets will see a slow but sustained improvement. This is largely due to the absence of the over-supply problems of the last recession, because the credit squeeze limited the property surplus before the current downturn began.

He comments: “Although the economic outlook looks highly uncertain, the UK, its regions and cities are better placed than the Eurozone to ride economic storms.

“In Manchester and the North West, rental growth in both the office and industrial markets has been achieved earlier than expected and we predict that this will continue at a steady rate.  Retail also reflects the trend, although consumer spending over the next two years will continue to face pressures from the fiscal squeeze.

“Prime property is holding up, despite difficult times, with our forecasts showing the top end of the industrial market, in particular, achieving rental growth from next year, rising to a rate of 1.8 per cent by 2015.  The office market shows a 3.4 per cent rental growth next year from this year’s level of 1.8 per cent, although this will drop slightly in 2013/14, regaining its position in 2015.  Yields will remain broadly stable in all sectors.

“North West economic growth, although slightly behind Manchester, is surprisingly resilient, given the importance of the public sector, which is still suffering from severe cut-backs, as the revival in its manufacturing industry continues to compensate for this.”

Steven Johnson, Jones Lang LaSalle’s Head of Industrial & Logistics North West, said that availability in the region’s industrial market had ‘gone full circle’ over the past three years.  In 2008, 21 new speculative units over 100,000 sq ft provided a supply of 5.4 million sq ft to occupiers.  “Now in November 2011, we have three buildings available totalling 420,000 sq ft and a big problem in the future satisfying predicted demand.

“The impact of this take up of space on the future growth of the region speaks for itself. The North West has always been successful in securing national/regional distribution centres and many major retailers have their headquarters here, but at present we have little to offer in the way of Grade A ready-made space to capture future demand.  At the same time, we are witnessing a reduction in good quality, second-hand supply.

“We believe that with no large scale speculative development likely to occur in the next two to three years, the market will shift towards ‘build to suit’ solutions, but for major enquiries  we are also facing a limited supply of ten acre plus key employment sites which are ready to easily and quickly accommodate occupiers’ needs.

“Looking forward, we predict premium rents for the right properties with deliverability being a key factor.  In short, sites with the right fundamentals and delivery partner will succeed.”

Matt Stretton, the firm’s Director of National Investment, echoed this concern within the industrial investment market:   “Investor confidence is low across all sectors.  There are requirements for prime opportunities, although this is met by a lack of supply.

“The gap between prime and secondary may continue to widen, particularly on secondary assets where the key property fundamentals do not exist.”