According to the latest research from Avison Young, Manchester is well on the road to recovery, after 2021 saw its economy grow by 8%, the second fastest* of 30 major European cities.
In 2022, Manchester’s economy is predicted to grow by 6.5%, a significant increase compared to a ten-year, pre-Covid average of 3.4%, with the growth driven by a rebound in the sectors which were hardest hit during the pandemic.
In the offices sector, demand for workspace continues to be robust and 2021 saw a healthy proportion of grade A take-up, of which there is a limited supply. This is contributing to the relatively muted levels of rental growth and is underpinning prime rents at the top end of the market, but overall, there is more available space than at any point over the last five years. Of particular interest is the growing tech sector in the city, with Roku and Cloud Imperium both committing to grade A space last year and due to occupy space during the course of 2022, bringing with them hundreds of new jobs.
Manchester’s retail offer remains buoyant and continues to attract retailers across a broad spectrum of offers, but like other major cities, has seen an increase in vacancy over recent years and is struggling to regain its pre-Covid footfall numbers. Vacancy for the city centre is at 17%, falling to 10% for prime space, with rents that were previously falling expected to start to plateau in the city.
In the hotel sector, Manchester is due to see the highest number of new openings outside of London during the course of 2022, the success of which will be driven by football and big events returning to the city.
The industrial market saw unprecedented levels of demand during 2021, leading to prime rental growth of circa 15% across the North West. This momentum is expected to slow in 2022, driven by a lack of available stock and a squeeze on land supply. As of Q4 2021, only 2.5 million sq ft of space was available across the entirety of the North West, which is lower than the five-year average take-up of 2.7 million sq ft. The strong demand is also driving increases in land values in Manchester, where values have reached £2 million at Trafford Park.
Another sector that performed well in 2021 was the housing market, which saw significant price growth and activity. In line with the wider prevailing trend across the UK, Greater Manchester properties with private outdoor space, or a high level of communal amenity space have seen the most demand. While this trend is expected to continue into 2022, transaction levels and price growth will be moderate but remain strong relative to pre-pandemic levels.
However, Manchester’s lack of affordable housing supply is a constraint, and the city will see an increase in supply from for-profit registered providers in 2022. The deal completed 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, most likely offers a glimpse of the future for further supply in the short-medium term.
The city’s ability to deliver new space across all sectors is likely to come under pressure over the next few years, as a result of build cost increases and the rising cost of materials that are essential for more sustainable development, known as ‘greenflation’. However, this is not just applicable to Manchester, and the city continues to reinvent itself across a number of sectors.
Chris Cheap, managing director UK Regions at Avison Young, said: “In a year that was not without its challenges, Manchester has proven once again that resilience lies at its core. It’s unlikely that some sectors will ever be the same as in their pre-Covid days, but that doesn’t mean it’s for the worse. Workspace landlords are evolving to create a more diverse offer, and demand for flexible office space is likely to increase during the course of the year. The leisure sector is also diversifying and with work set to start this year on the UK’s first city-based wellbeing resort at Trafford Park, Manchester is continuing to champion new and exciting projects.
“We expect to see significant amounts of development and regeneration across the Greater Manchester boroughs this year, not just in the city core, and those projects will undoubtedly be under greater scrutiny not just for their green credentials, but also for their deliverance of social value. Under Bev Craig’s new Manchester City Council leadership, we expect to see these subjects brought into even greater focus which can only have positive ripple effects across the region.”