A decade ago, office refurbishments in Manchester generally involved simple redecoration, basic improvements to common areas and taking a formulaic approach rather than embracing any real design innovation. Projects were largely limited to the city centre and offered rents approximately 30 per cent lower than those for Grade A space.
The picture today is very different. Geographically, refurbished offices are more broadly located and, in particular, have increased their presence in fringe areas such as the Northern Quarter, Ancoats and Knott Mill. This is in direct response to rising rents in core areas and the ever-increasing scale of the city.
Today’s occupiers want originality. As such, landlords are taking a more bespoke approach to creating a refurbishment which is in keeping with both the property and its target market. Manchester’s rich heritage means some buildings have great character which can be drawn upon and enhanced, while others still offer a more traditional approach. The strength of demand means there is an ample market for both.
A traditional base of professional and financial firms continues to occupy Manchester’s refurbished office space, along with a growing number of ‘new’ industries – both younger companies and those with a more youthful employee base. The rental gap between refurbished and top Grade A offices has narrowed to around 15-20 per cent but refurbished space still offers an affordable option, while the stripped back, creative fit-outs available can help companies appeal to new generations.
For landlords, delivering a high-quality refurbishment is a long-term property investment, creating rental growth opportunities in the short term and boosting sale value in the longer term. Aviva’s £20 million refurbishment of 11 Portland Street (pictured) is a prime example, with 20,000 sq ft and 13,500 sq ft lettings completed on the back of this. Similarly, AEW is nearing the completion of a major refurbishment at 101 Barbirolli Square, which has generated a spike in occupier interest.
Savills research estimates that 38 per cent of the total speculative office space being delivered in UK regional cities over the next three years will be in the form of refurbishments. At a time when commercial property returns will be income led, comprehensive refurbishments of secondary space will enable landlords to maximise rental income, attract higher tenant covenants and ultimately enhance the capital value and longevity of the asset.
Manchester’s strong economic outlook, tight occupational market, rising office rents and growing migration from sub-regional centres to the city core mean those investing in the delivery of high-quality refurbished office stock now could well see their decision prove fruitful in the coming years.