Knight Knox attends the Deloitte Real Estate annual Crane Survey, Manchester

“In 2020, year on year, we see the level of development in Manchester levelling out” was one of the opening remarks from Michael Percival who led this year’s presentation of Deloitte’s annual Crane Survey, held at the iconic Manchester Hall on Bridge Street. The crane survey is an industry leading review of the development sector, tracking and presenting the facts and figures of development activity across a specific city area, with hundreds of industry professionals attending the presentation. Over recent years the survey has reported on the exponential growth, year on year, in Manchester, but this year’s survey summarises “significant but reduced activity” and explores the factors which have caused this slow down and why it can still be seen as a good thing for the city on the whole.

Knight Knox attends the Deloitte Real Estate annual Crane Survey, Manchester

Both the presentation and the survey results are broken down into a number of main sectors; Residential, Office, Retail, Leisure and Hotels and finally Student Education and Research.

Residential

Over the last few years the residential market has been the fastest growing sector in Manchester. At last year’s event Deloitte forecast 5,900 residential units would be brought to market in 2019, the actual figure was only 3,619 units delivered. Ambitious delivery targets driven by a fierce completion in the sector have evidently stretched the capabilities of the market. The delivery of units has still increased year on year since 2015 and we expect much of this mis delivery to be carried into 2020.

The forecast is still healthy for residential schemes, especially in the areas like Salford, which took 43% of new units in 2019, and the southern arch of the city around Deansgate square, which was the second largest area of residential growth. The report also concluded that the eastern gateway around new Islington has remained a hotspot for residential development. Prices show that demand is ahead of supply and the total number of units in construction currently stands at 12,357. So, delivery over the coming 1-3 years is going to be very healthy in this sector.

Office

Volume remains high in this sector, with the amount of pipeline development similar to the levels last year with a total of just over 2,000,000 sqft of office space currently under construction. This is illustrative of the continued economic growth in the city which is closely linked to this sector and drives the demand. The increased demand is further emphasised by the number of pre let office developments reported – currently 40% of office space in construction has already been let across 14 schemes in Manchester, showing a large amount of faith in the city.

The links between the office sector and the economy of the city are evident when you take a closer look at the diverse range of take up in the market. TMT industries (Technology, Media and Telecoms) accounted for 40% of office take up in 2019, with serviced offices and legal and professional taking 19% and 16.5% respectively. With new digital industries, along with smaller start-up businesses, constantly attracted to serviced offices and occupying such a large amount of new take up shows the types of industries settling into Manchester. The new thriving digital and media industries help to differentiate Manchester from other regional centres and the capital. Manchester is developing a reputation as the fore runner in the digital sector, and whilst this survey doesn’t include The Quays and MediaCityUK in Salford, the growth in these districts only amplifies this trend in Greater Manchester as a whole.

Although this year the number of new offices developments in construction has fallen to only 5 new schemes, the pipeline in the planning system along with sustainable growth and many new offerings late in 2019 keep the outlook for this sector strong, but probably past its peak for now.

Retail, Leisure and Hotels

The retail, leisure and hotel sector is closely linked to consumer habits, as Manchester grows and it’s economic and residential offering changes, so does its retail and leisure industries. Deloitte found that consumers have been reducing their net spending on groceries, utilities and transport, an indication that lower inflation is easing pressure on essential items. As a result, leisure sector categories such as going to the cinema or eating out have seen a strong recovery compared to the same period a year ago. A sign that people continue to favour experience over goods.

Leisure industry growth must also account for the increase in visitor numbers, expected to reach a growth rate of 13% in the three years to 2022 and illustrated in the 185% year on year increase in the number of Chinese tourists in 2019. This increasing demand for leisure and hotel services has in turn promoted growth in the hotel sector with 2019 seeing a 24% rise in the number of hotels bed under construction. Manchester’s iconic and growing cultural scene – with events such as The Warehouse Project and Manchester International Festival – have contributed to a 5.4% rise in the value of Manchester arts and entertainment sector, further promoted by the local council who have invested in a new cultural building ‘The Factory’, due to open in late 2020.

The outlook is not quite as positive for the retail sector which, as part of a national trend, is struggling to compete with online shopping. But there was growth in the offering of commercial space to support communities, such as local shops as part of residential developments.

Student Education and Research

Purpose-built student accommodation is on the rise again after no student beds were delivered in 201;8 603 beds are set to be delivered this year and a further 807 student bed are in construction and due to complete in early 2021. It was the bright future of the education and research sector that dominated this section of the report. The Deloitte Survey revealed new developments broke ground during the reporting year, noting CityLabs, a specialist building at the school of Digital Arts, and a new hub tech Base at Manchester Science went in for planning. This again repeats the sentiment throughout this year’s findings, Manchester is developing its position as a digital hub and the growing digital industry has permeated its way into development sectors.

The general consensus during the concluding Q&A session with Sir Richard Lees and Chris Oglesby, Chairman of Bruntwood - the North West’s largest office space owner, was overall very positive. Although the development scene in Manchester has slowed from its previous exponential growth, demand for future projects is high and the forecast of delivery numbers for the year ahead show a strong market and the slowing rate can be seen as more sustainable growth. As a city, Manchester must continue to focus on its mission of promoting office and residential developments in line with economic growth to continue to achieve great things.


Quarterly Report vertical - April 2019

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