Cushman and Wakefield Manchester: 2020 Predictions

With the start of a New Year, we are looking ahead to what we can expect from the real estate market in Manchester, and the wider North-West. Here are our predictions from key skill lines across the Cushman and Wakefield Manchester office.

Public Sector Advisory:

The big public sector story for 2020 will be the March Budget and what this tells us about the new government’s spending priorities. There will be three areas of focus: the NHS, the north of England and “shovel ready” projects. NHS Trusts and Clinical Commissioning Groups (CCGs) in the North should be polishing their business cases now in readiness. It follows that local government and local health bodies need to work even closer together. Health spending will be critical to economic growth in some deprived communities.

There will also be new announcements on supporting the High Streets with more money allocated and an increased emphasis on northern towns. Business rates will be reduced for independent retailers. The government will also confirm changes to HM Treasury business case rules to better favour projects beyond London and the South East. The Budget will not bring universal good news. Some capital projects will be reviewed, delayed or cancelled. The big question is whether the High Speed 2 project will be one of those. Finally, we are unlikely to see any major breakthrough on the critical question of long-term funding for social care.

John Keyes, International Partner.

Retail:

2019 was a turbulent year in the retail market, with a number of operators issuing CVA’s in an effort to reduce the financial liability of their store portfolios. We would expect this pattern to continue in 2020, although perhaps to a lesser extent particularly if the government introduces major changes to business rates. On the High Street we expect to continue seeing the addition of non- traditional retail uses, such as healthcare and gym operators, into the tenant mix. We expect leisure uses to play a strong role, particularly in shopping centres, where landlords are eager to increase dwell time and provide customers with a more holistic shopping experience.

George Lowe, Surveyor.

Office Agency:

Manchester city centre enjoyed another strong year of office take-up in 2019, with more than 1.45m sq ft of workspace let across 261 transactions. Whilst lower than the record figures of 2018, this is still above the 5-year average of 1.35m sq ft. 2019 also saw a new record rent of ￡36.50 psf achieved when JLL acquired the 10th floor at Landmark, which completed at the end of last year. Cushman & Wakefield is predicting strong take-up in 2020, with a number of high-profile transactions due to complete in the first half of the year.

 Manchester’s office market continued to perform robustly despite the political uncertainty and a diminishing lack of readily available Grade A supply. As we move in to 2020, with a strong supply of new development delivering high quality workspace to the market and a more stable economic backdrop, we expect a strong start to the year with a number of high-profile transactions in the pipeline. In totality, the out of town markets Cushman & Wakefield monitor, South Manchester, Salford Quays and Warrington transacted an additional total of 1,199,248 sq ft in 445 transaction demonstrating the vast extent and depth of the Greater Manchester office market.

Rob Yates, Partner.

Development Consultancy:

Despite the strong mandate the Conservative Government has received through the General Election to get Brexit done, 2020 will remain a year of uncertainty in terms of our future relationship with Europe and the rest of the world set within the context of global economic trends and their potential impact on the property market.

There is however certainty that a number of areas will remain priorities – how we respond to the housing crisis, how we deal with our ageing population and how we respond the renewed focus on the environment.

My prediction is that town centres will play a critical role in 2020 responding to these challenges. New homes on brownfield sites will take pressure off our Green Belt. Concentrating opportunities in well connected locations and investing in modern energy efficient buildings will reduce our carbon footprint as well and enhancing their viability through enhanced footfall.

Places to watch include Preston, Stockport and Macclesfield where great connectivity, clear vision and strategy, public sector support and increasing interest from developers and investors will come together to demonstrate how smaller cities and town centres can support a new wave of investment in urban centres creating great sustainable and healthier places to work, live and enjoy shopping, leisure and cultural opportunities.

Caroline Baker, Partner & Head of Manchester Office.

Student Investment:

Since 2014, the number of 18-year-olds has dropped year on year, with 2020 seeing the fewest since 2000. Despite rising entry rates, the number of 18-year-olds entering the UK higher education sector has dropped in recent years, having a greater impact on student numbers at post-92 former polytechnics. Recently, universities have focused on recruiting non-EU students and in the latest HESA (2018/19) data released in January 2020 the University of Manchester had increased their non-UK population by 700 students, an increase for the 6th consecutive year. Just under 3,600 new beds should enter the purpose-built student accommodation market in the North West for September 2020 with schemes set to open in Chester, Lancaster, Liverpool, Manchester and Salford.

Joseph Linney, Consultant.

Planning:

Following the general election success for the Conservatives at the end of 2019, the local and mayoral elections will be watched closely for their potential impact on planning across the region. Should a similar pattern occur at the local level, then we could see more Conservative-led Councils which could threaten to stall Local Plans under preparation as political change often sees these strategic policy documents sent back to the drawing board. This would be a backward step for the North West, with the start of 2020 seeing a number of Authorities commencing the process of producing new or refreshed Local Plans, including Salford, Wirral, and Manchester; and of course the GMSF, next due for consultation in Summer 2020, could certainly do without any additional hurdles.

The definitive majority Government should mean that the various planning updates and legislation that had been stalled should progress in 2020. This will include the Environment Bill, Accelerated Planning White Paper and the 2019 housing delivery test results amongst others.

Finally, and linked to the Environment Bill in many ways, we expect to see the climate crisis take more of a centre stage in planning during 2020. With numerous UK cities in other regions bringing forward proposals for low emission zones to improve air quality in city centres and encourage public transport usage, might North West cities follow suit during 2020?

Andy Teage, Partner & Claire Pegg, Associate.

Residential:

The residential property market is in a period of flux. The political uncertainty resonated into the sector throughout 2019. The Conservative victory in the general election has seen some of this uncertainty removed from the market, but it is yet to be seen how Brexit will affect the sector. Sales expectations have risen, which is expected to lead to a pick-up in house price inflation both in the coming months and across the year ahead as a whole.

Availability of suburban housing land remains a key issue across the North West with few sites coming to market and increased competition on those that are available. We expect with this increased competition to see rises in land values as developers stretch to win sites.

Build costs continue to increase across the sector putting pressure on the viability of schemes. 2019 saw some high-profile companies slip into administration. 2020 will likely see a greater emphasis on build cost control and profit margins for developers.

The outlook for the North West as a whole remains strong. Sales values are not as inflated in comparison to the South which offers opportunity for further future value growth. Demand is also robust and as new schemes come forward this will only be positive for the region. 

Alex Isles, Senior Surveyor.

National Logistics and Industrial:

The North West industrial market saw take up for 2019 reach 3.8 million sq ft in the North West which was down compared to the previous year. 

Despite this, confidence in the market remains strong and we anticipate that take up for the first half of 2020 will be in excess of 2 million square feet for units over 50,000 sq ft, with 2 million sq ft currently either in legals or having already completed since the beginning of January. One major deal which has already taken place is Kelloggs acquiring 525,000 sq ft at Haydock525, the largest speculative industrial unit to have been developed and let in the region in its’ entirety for over a decade.

 On the development side there still remains a real appetite for further speculative development in the region, with competition for well-located and accessible sites remaining fierce amongst developers, with the pipeline for speculative new build schemes under construction/set to complete being currently limited. We believe there will be demand for further schemes across the region. New build units acquired recently have seen a steady rental growth in the region for the last 12 months and we predict that a new headline rent for the region could be achieved this year    

Will Kenyon, Senior Surveyor.

Capital Markets:

In general, macro-economic and political uncertainty affected supply of stock and investor confidence in the region, which led to stifled transaction volumes throughout 2019. Despite that, sentiment around certain asset classes in the North West remained resolute. Strong occupational demand and rental performance underpinned office and industrial/logistics markets in particular, whilst alternatives such as healthcare, Build to Rent residential, hotels and student accommodation continued to attract capital and grew as a share of the market as a whole.

As with the national picture, retail had a challenging year with high streets, out of town parks, shopping centres and department stores all seeing significant softening of yields set to a backdrop of business rates, online competition, high-profile administrations and CVA’s; although we expect this will create new opportunities for investors with fresh approaches who wish to reposition for alternative uses.

A decisive result in December’s general election and clarity on the UK’s departure from the EU on 31st January has led to a renewed sense of optimism in the market and it is hoped there will be an influx of stock that had previously been withheld. We expect Manchester and the North West region will remain the primary attraction for both UK and international capital outside of London throughout 2020, provided there is enough supply to meet demand. Activity in January so far has been indicative of a market that is heating up and we remain positive about the year ahead.

Will Westley, Graduate Surveyor.