We hope you find this report interesting. If you have any queries in relation to flexible workspace, please contact me at douglas@gkre.co.uk.

Manchester has played a central role in

the UK’s economy since the Industrial

Revolution and remains one of the country’s

economic powerhouses.

It is no surprise then that its flexible space market is the largest outside London and one

that is growing fast. There’s a huge choice for

occupiers in terms of both location, product and quality and this choice was extended recently with the introduction of WeWork’s

first regional centre.

This report will give you the inside track on

Manchester’s local flexible workspace market, the office market as a whole and the area’s economic prospects. Like our previous reports

on Leeds and Bristol, it has been produced in conjunction with the Business Centre

Association (BCA).

A key driver of Manchester’s economic success

is its diverse business base. This ranges from business, finance and professional services to manufacturing health, technology and media.

Greater Manchester is the largest city region

economy outside London and is forecast by EY to be the UK’s strongest performing city in terms of both gross added value (GVA) and employment growth in the period up to 2020.

We expect Manchester, and its flexible space market, to go from strength to strength.

Highlights of this report include:

• The current state of the Manchester

flexible market, including a table

showing operators in the city

• Where Grade A rents are

expected to be in 2018

• The factors behind Manchester having the

UK’s highest economic growth

prediction in the period to 2020

• Information about Manchester’s

Northern Quarter, a new hub for tech

and creative businesses in the city

• Reasons behind Manchester’s

shortage of Grade A stock

• Plans for the £1bn extension

to MediaCityUK

WELCOME FROM GKRE DIRECTOR, DOUGLAS GREEN

MANCHESTER – THE FLEXIBLE WORKSPACE MARKET

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LOCATION OF CENTRES

Manchester’s flexible space market is spread out across the city, as can be seen from the schedule on pages 3 and 4. The main cluster of

centres is in the city’s traditional commercial

heart around King Street, Deansgate and surrounding streets, and in the area around Piccadilly railway station. These centres tend

to be in older office buildings.

In recent years, Spinningfields (on the eastern side of Deansgate) has emerged as a new financial and business district. Local occupiers include Barclays, HSBC, several accountancy firms, including PWC, and a number of law firms, among them Nabarro and DWF. No. 1 Spinningfields is the newest, highest specified building in the area and the largest to be built in Manchester in 50 years. WeWork has taken

60,000 square feet in this 400,000 square foot mixed-use building for its first centre outside London.

Salford Quays, on the banks of the Manchester ship canal, has been the subject of redevelopment since the mid-1980s and is now home to several centres. Adjoining

Salford Quays is MediaCityUK, a 200-acre mixed-use scheme which includes among its occupiers the BBC and ITV. Find out more about MediaCityUK, and its proposed £1bn expansion, on page 6.

One of the city’s most vibrant area is the Northern Quarter, the area between Piccadilly station, Victoria station and Ancoats. This area is known for its bars, cafés, galleries, music and clothes shops, and is popular with a young demographic. The area has several co-working spaces and is a centre for creative and tech

businesses. Much of the flexible space in this area is run by small independent operators from former Victorian mill and factory buildings. (Read more about the Northern Quarter on page 5.)

PRICES

Prices in the central core (Piccadilly, King Street, Spinningfields, etc) range from around £250 to £460 per desk per month to around £125 to £150 per month for fixed desk co-working space (with variations in terms of the

quality of the space and packages available).

WeWork’s no.1 Spinningfields, M3 and Bruntwood’s NEO, Charlotte Street, M1 are at the top end of this range and for this occupiers

get a private desk and use of facilities such as

coffee machines, cycle parking and showers. WeWork’s prices start at £460 per month for single desk offices, though we are aware of deals having been done at below their quoted prices in order to attract occupiers.

Prices outside the central core are slightly

lower, with private desks in Salford Quays, from around £280 per month and fixed desk co-working space from around £200 per month at the top end. Space is cheaper in the

Northern Quarter, with hot desk co-working membership available from £150 per month.

OPERATORS

Most of the leading operators have a presence

in Manchester including Regus (10 centres), Bruntwood (five centres), Citibase (three centres), Landmark (two centres), Orega (three centres), Stonebridge (two centres) and WeWork (one centre, with a second opening in April 2018). It is also home to established independents including Anvic (two centres),

iHub and Universal Square.

TYPES OF SPACE

There’s no lack of variety in Manchester and

occupiers can choose from a full range of

products: traditional serviced offices, fixed desk co-working, hot-desking, design-led workshops, etc.

BizSpace’s Commercial Director Emma Long says: “Businesses now are looking for more

than just an office space. They want their work environment to be a true reflection of their brand and for employees to feel that they have come home. We make sure that all of our sites

offer exciting destinations for our wide range of customers, allowing them the flexibility to create their own unique space.”

Bruntwood’s Charlie Beck says one of the

challenges for operators is to stand out in a

crowded market. It does this at its Trafford

House office by offering occupiers free use of its on-site gym. “Everyone has done lounges and bike stores for a while so everyone expects it,” he says. “What you want to do is create somewhere where customers want to stay and

where you can attract new customers.”

“Prices in the central core range from

around £250 to £460 per desk” 2

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NAME OF CENTRE LOCATION OPERATOR

111 Piccadilly 111 Piccadilly, Manchester, M1 2HY Bruntwood

Piccadilly House 49 Piccadilly, Manchester, M1 2AP Anvic Developments

Citibase Manchester 40 Princess Street, Manchester, M1 6DE Citibase

Orega Manchester 3 Piccadilly Place, Manchester, M1 3BN Orega

Neo 9 Charlotte Street, Manchester, M1 4ET Bruntwood

Peter House Oxford Street, Manchester, M1 5AN Regus

The Hive 51 Lever Street, Manchester, M1 1FN MSO Workspace

City Tower 13th Floor, City Tower, Piccadilly Plaza, Manchester, M1 4BT iHub Office

Lowry House 17 Marble Street, Manchester, M2 3AW Bruntwood

Bartle House Oxford Court, Manchester, M2 3WQ Stonebridge

Chancery Place 50 Brown Street, Manchester, M2 2JG Landmark

Bartle House Oxford Court, Manchester, M2 3WQ Stonebridge

Headspace Manchester 2 Mount Street, Manchester, M2 5WQ Headspace

Manchester King Street 82 King Street, Manchester, M2 4WQ Regus

Orega King Street 76 King Street, Manchester, M2 4NH Orega

Pall Mall Court 61-67 King Street, Manchester, M2 4PD Regus

1 St Peter’s Square 1 St Peter’s Square, Manchester, M2 WeWork

Fountain Street 53 Fountain Street, Manchester, M2 2AN Regus

Centurion House 129 Deansgate, Manchester, M3 3WR Bruntwood

3 Hardman Square 3 Hardman Square, Spinningfields, M3 3EB Landmark

Central Working Deansgate

231-233 Deansgate, Manchester, M3 4EN Central Working

No 1 Spinningfields Quay Street, Manchester, M3 WeWork

Spinningfields 10th Floor, 3 Hardman Street, M3 3HF Regus

MANCHESTER FLEXIBLE SPACE MARKET – JANUARY 2018

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“The Manchester market is expanding rapidly mainly thanks to the

incredible growth in SMEs over the past few years. The city is becoming

increasingly appealing thanks to a more affordable life compared to the

capital, its connectivity and its walkable size”

DAVID SAUL, MD OF BE OFFICES WHICH ACQUIRED CO-WORKING SPECIALIST HEADSPACE IN NOVEMBER 2017

Manchester city centre postcodes

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NAME OF CENTRE LOCATION OPERATOR

Imperial Court 2 Exchange Quay, Manchester, M5 3EB Serviced Office Company

Universal Square Business Centre3rd Floor, Building 2 Universal Square, Devonshire Street

North, Manchester, M12 6JHUniversal Square

City View House 5 Union Street, Ardwick, M12 4JD Anvic Developments

Hill Quays 14 Commercial Street, Manchester, M15 4PZ Keepoint

Empress Business Centre 380 Chester Road, Manchester, M16 9EA Bizspace

Citibase Old TraffordOakland House, 76 Talbot Road, Old Trafford, Manchester,

M16 0PQCitibase

Astra Business Park, Guinness Road, Manchester, M17 1SD Bizspace

Manchester Didsbury Adamson House, Towers Business Park, Didsbury, M20 2YY Regus

Manchester Business Park 3000 Manchester Business Park, Aviator Way, M22 5TG Regus

Lowry Mill2nd Floor, Lowry Mill, Lees Street, Pendlebury, Swinton,

Manchester, M27 6DBRegus

Trafford House Chester Road, Old Trafford, M32 0RS Bruntwood

Wilsons ParkNewton Heath, Wilsons Park, Monsall Road, Manchester,

M40 8WNBizSpace

Manchester Digital World Centre 1 Lowry Plaza, The Quays, Salford, M50 3UB Regus

Clippers House Clippers Quay, Salford Quays, M50 3XP Serviced Office Company

Blue Tower MediaCityUK, Salford, M50 2ST Orega

Citibase Salford Quays Transport House , Merchants Quay, M50 3SG Citibase

MSO Airport City Manchester5th Floor 4M, Chicago Avenue, Airport City, Manchester,

M90 3RRMSO Workspace

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“We are confident about expanding in Manchester. The market is still relatively small compared to the London market and I don’t think it has

reached anywhere near its full potential yet”CHARLIE BECK, HEAD OF SALES, BRUNTWOOD

Manchester postcodes

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FLEXIBLE SPACE OCCUPIERS

Manchester has a wide range of

occupiers, which is to be expected given the diversity of its business base.

Bruntwood’s Head of Sales Charlie Beck says that occupiers come from across

the board: “In our offices we are seeing the usual mix of professional services companies, recruitment companies, satellite offices, SMEs and start-ups.”

Orega’s Regional Sales Manager Jason

Cooney says that while the centres in

and around MediaCity tend to attract

media and digital businesses, there are still a variety of occupants here including

lawyers, banks and finance companies.

In the city’s Northern Quarter – described as its “creative epicentre” – occupiers include software developers, writers, designers and other creatives.

PROSPECTS FOR THE MARKET

Local operators describe Manchester as “buoyant” and cite its impressive infrastructure, business diversity and strong economic growth as reasons why they

expect the office market, and flexible space market in particular, to thrive in 2018.

The operators we spoke to were

positive about the impact on the local market of WeWork opening two

new offices in the city centre.

Bruntwood’s Charlie Beck says that although

they lost a couple of customers when

WeWork’s office in No 1 Spinningfields opened, he believes their presence will be positive for the other operators. “There

may actually be more demand because people will become increasingly aware of the product we offer,” he says.

THE NORTHERN QUARTER

The Northern Quarter (also known as “the NQ”) is Manchester’s most vibrant community, known for its colourful street art, bohemian bars and buzzy restaurants. It has also become a focal point for many of Manchester’s young creatives and tech start ups, and a host of flexible offices and co-working options have sprung up as a result. One of the features of the area is the innovative ways operators are selling space. Ziferblat in Edge Street offers coffee, 43 kinds of tea, newspapers, wi-fi, even cake, for “free”, provided you pay 8p per minute for the time you spend there (capped at £19.20 per day).

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MEDIACITYUK

MediaCityUK is a 200-acre mixed-use development by the Peel Group on the banks of the Manchester Ship Canal in Salford

Quays.

It describes itself as an international hub for technology, innovation and creativity and is home to the BBC, ITV, Ericsson and more than 250 smaller media and digital companies.

The BBC has been at MediaCityUK since 2011, employing around 3,200 people. Its 26 departments based on the site include BBC Sport, BBC Radio 5 live and BBC Breakfast.

In 2016, permission was granted for a £1bn expansion of Salford Quays. The development will double the size of MediaCityUK as well as provide new shops, offices, a 330-bedroom hotel and over 1,400 new homes.

More than 60,000 people work in the creative and digital industries in Greater Manchester

and this is forecast to increase by 27% by 2034.

The main operators serving MediaCityUK are

Regus, Orega, Serviced Office Company and Citibase.

“Planning permission has been granted for a £1bn expansion of Salford Quays which will

double the size of MediaCityUK”6

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RECENT OFFICE ACTIVITY

Take up in Manchester city centre in Q4 2017 was 278,073 sq ft, a 55% decrease on Q4 2016, although it followed an exceptional Q3 2017.

Total take up for 2017 was 1,208,184 sq ft in 271 transactions, the fourth consecutive year take up has exceeded the 1m sq ft barrier. Last year was slightly down on 2016 but in line with the five year average and 13% higher than the 10 year average.

The most interesting transaction in the

quarter was the 13,610 sq ft taken by global co-working brand Our Space at FORE Partnership’s Windmill Green development in

Mount Street, M2. The space is due to open in the summer of 2018 and will offer hot desks and dedicated work areas. Our Space

CEO Kevin Halliwell said: “Manchester plays a key role in our desire to bring a distinct and unparalleled workspace experience to the UK’s Northern Powerhouse.”

Elsewhere, Manchester City Council has taken 20,034 sq ft at Bridgewater House, Whitworth Street, M1 and online retailer AO entered into the quarter’s biggest deal, taking 28,749 sq ft at Riverside, M3 from Bruntwood.

Out of town, take up in South Manchester was 162,736 in Q4 2017 (640,948 for the year – up 17% compared to 2016). The take up at Salford Quays and Old Trafford was 285,202 for the year, 21.7% down on last year but that included two large deals.

The highest rent achieved in Q3 2017 was £33.50 psf pa over 14,086 sq ft at 3 Hardman Street, Spinningfields. In total, 14 transactions were achieved above the £30 psf level in 2017. Prime headline rents are likely to edge up to around £34 psf this year and with a shortage of Grade A stock available, prime

secondary rents are likely to increase too.

Data on this page from Lambert Smith Hampton

Recent major occupational transactions include:

• Riverside, M3 –

28,749 sq ft let to AO

(rent undisclosed)

• Bridgewater House –

20,034 sq ft let to Manchester

City Council at £18.50 psf

• Arkwright House, M3 –

15,045 sq ft let to Push Dr

(rent undisclosed)

The investment market

Greater Manchester saw £491m of investment activity in Q4 2017, an increase of £171m compared to Q3. Total office investment in Manchester city centre was £457m across 11 transactions.

Numbers were boosted by Manchester’s largest ever single-asset deal, the acquisition of No 1 Spinningfields by Schroder REIM for £200m. Other deals included 3 Hardman Square and 1 New York Street bought by Royal London for £107m and £55m respectively.

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UPCOMING ACTIVITY

There is a record low level of supply of Grade

A office stock in Manchester city centre with little new space under construction.

Lambert Smith Hampton estimates that there is approximately only 160,000 sq ft of prime office space currently available and no Grade A office schemes due to complete in 2018.

According to Savills, the average annual growth in office-based employment for Manchester and Salford is projected to be 1.7% pa over the next decade, compared to 1.4% pa over the past decade. This is equivalent to 34,123 office-based jobs and a gross increase in office occupation of at least 2.9m sq ft. Oxford Economics

predicts that the largest growth areas will

be the professional, science and technology, and administrative and support sectors.

By contrast, there will be a slowing of growth in the finance and insurance sector and this will relieve some pressure

at the top of the office rental market.

With increased demand and a shortage of

Grade A space, we expect there to be plenty of refurbishments of existing buildings by landlords. Savills predicts that “the rising

popularity of light touch refurbishments will mean that more Grade B and C quality office space can be brought back into economic use for comparatively affordable rents”.

FUTURE ACTIVITY

An interesting aspect of the Manchester

market is likely to be the expansion of the existing core area to meet demand, especially from businesses that don’t necessarily need to be right in the centre of town. BizSpace’s Emma Long says: “Interest from media and

tech companies looking to take space in the

city shows little sign of abating. As such, areas such as Salford, the Northern Quarter and MediaCityUK look set to continue to benefit from their demand.”

The city has already earned the moniker

“Silicon Valley of the north” and this has led to the spread of the business sector into Ancoats, next to the Northern Quarter.

Other emerging sub markets include the Irwell corridor, (where AO is set to open a new digital hub), and “Corridor Manchester” (also called “the knowledge corridor” due

to its proximity to the university). This is an innovation district south of the city centre

that runs the length of Oxford Road from St Peter’s Square to Whitworth Park.

One of the developments here is Bruntwood’s

Circle Square on the old BBC site (a JV with Select Property Group) that will include

1,200 new homes and more than 1.2m sq ft of offices, hotels, shops restaurants and bars. Completion of the development will be in three phases between 2019 and 2023.

“We expect there to be plenty of refurbishments of existing

buildings by landlords”

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MANCHESTER’S ECONOMY AND ECONOMIC PROSPECTS

Manchester has risen to third in a list of

the UK’s largest towns and cities outside

London that are best positioned for growth.

According to Lambert Smith Hampton’s

UK Vitality Index for 2018, a rise in

wages and an increase in the number

of businesses in the city has seen it go

from ninth place to third, behind Oxford

in second and Cambridge in first, a rise

described in the report as “meteoric”.

Looking further ahead, the city is set to

perform better still, according to Ernst &

Young’s (EY) latest UK Regional Economic

Forecast. EY says Manchester’s economy

is set to grow faster than anywhere in

Britain, with predicted growth of 2.4%

per year in the period to 2020.

Says the forecast: “The strong GVA

performance - both historic and projected

- for Manchester reflects the substantial

investments made over more than a

decade in revitalising the city centre and

the surrounding business infrastructure.

“This has allowed the city to strengthen

and diversify its local economy and ensure

it can capture growth waves and avoid being

overexposed to slowdown in a single sector.”

“EY says Manchester’s economy is set to grow faster than anywhere in Britain, with predicted growth of 2.4% per year in the period to 2020”

KEY STATISTICS

• Manchester is the UK’s main centre for

financial and professional services outside

London, employing 224,000 people

and generating £9bn of GVA per year

• Manchester is the largest creative and

digital hub outside London, employing

63,000, many of them in MediaCityUK

• 163,000 people in Manchester are

employed in the health and life science

sectors, generating GVA of £4.7bn a year

• It is estimated that the levels of

job creation in Manchester could

outpace Berlin, Tokyo and Paris

between 2015 and 2020

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GKRE is the UK’s leading specialist flexible workspace agency. Founded in 2013, the directors bring to GKRE more than 25 years’ experience in the flexible workspace industry between them.

Our clients include operators and landlords across the UK, from major PLCs to independent companies.

We have recently been involved in the merger and acquisition of businesses worth over £40m, comprising more than 450,000 square feet in some 50+ buildings. On the agency side, we have acquired in excess of 450,000 square feet for the UK’s leading operators.

GKRE advises landlords and building owners throughout the UK on their flexible workspace options and opportunities to partner with flexible workspace providers.

Please visit gkre.co.uk for more information on how we assist property owners, tenants and flexible workspace operators, and for details of our latest transactions.

About GKRE

We have been nominated as both specialist and niche agent of the year by Estates Gazette and Property Week

11 Golden Square, London W1F 9JB020 3427 5679 www.gkre.co.uk

Douglas GreenE: douglas@gkre.co.uk

T: 020 3427 5678M: 07855 825 088

Will Kinnear, MRICSE: will@gkre.co.uk

T: 020 3427 5677M: 07811 942 752

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