Fringe schemes: As some developers race to build in Manchester’s city centre, others say that maybe it is time to slow down.
There is no sign of let-up in the race to deliver Manchester’s next batch of large, strategic mixed-use developments. As if 800,000 sq ft of completed grade A office floorspace this year was not enough, developers are rushing ahead with a further tranche of next-generation schemes, which will define the city during the next decade.
Reservations
While the developers involved are certain that the city centre can soak up the supply, others have reservations about whether development on such a scale is needed.
Unsurprisingly, Manchester-based Ask Developments does not share these concerns. It has two big sites totalling almost 5m sq ft primed and ready to go. On the Salford border, north of the city centre, it is planning the 3.2m sq ft Exchange Greengate while, in the south, it is already on site with the 1.75m sq ft Central Spine.
Greengate involves a major redevelopment of a neglected section of the city centre, with links to the prime shopping core around Harvey Nichols and Exchange Square. The scheme, a joint venture with Network Rail, relies upon £8.5m of public realm works, which has now been funded by English Partnerships.
John Hughes, development director at Ask, says the company plans to be on site with a speculative office scheme of between 150,000 sq ft and 200,000 sq ft by the first quarter of next year – a timescale that could surprise some in the market who believe the scheme to be a distant proposition. “Our intention is to have a major investment in the first phase, including offices, residential and a hotel. We are dealing with reserve matters and working up detailed designs,” he says.
Meanwhile, at the 20-acre Central Spine, work on the former BT building at Grand Island has begun, in order to provide 175,000 sq ft of offices. Ask director Stephen Cliff says the scheme’s large floorplates of 25,000 sq ft are typical of what is planned for the rest of the site, and will differentiate the project from its rivals. Another differentiating factor is rents, with Greengate going for prime rents and Central Spine likely to be discounted.
“A tenant will always have a choice of different schemes,” says Cliff. “It’s not just Ask, it may be Spinningfields or something else. We feel that, as long as we can manage the risk and differentiate by way of the floorplate sizes, we can achieve lettings at Central Spine and Greengate at the same time.”
Hughes adds: “Greengate is a different sort of product with 10,000 to 15,000 sq ft floorplates, so we aren’t looking for the same occupiers.”
In a joint venture with Realty Estates, Ask is also developing the Boddingtons’ brewery site, which is likely to be pitched at smaller, creative occupiers, possibly on a freehold basis.
The scheme, which is at a much earlier stage than Central Spine and Greengate, is one of a series of large projects being proposed around the city fringes (see map). They include the redevelopment of Granada’s19-acre landholding on the Salford border, as well as the huge Central Salford site, where English Cities Fund is involved.
In the shorter term, Muse Developments is proposing a scheme with Network Rail on the Fishdock site at Victoria Station. More than 500,000 sq ft of offices is proposed, a chunk of which will form a speculative first phase. Muse director Matt Crompton says that a planning application is likely to be submitted in around a year’s time, with a start on site possible at the end of 2009.
He acknowledges that developers working on schemes north of the city centre need to “co-ordinate activity”. Such projects include not only Victoria and Greengate, but the potential redevelopment of the 20-acre Co-Operative Group site off Corporation Street.
Opportunity
Crompton believes the northern gateway is “an obvious place for opportunity”, and cites the advantage of connectivity with prime retail and leisure, as well as transport hubs. He is also aware of the potential timing clash with Greengate. “Our project will be different from the Ask scheme, and we aren’t afraid of the competition,” he says.
“Greengate is lower density, low-rise buildings. Our scheme will be more corporate and has a different USP with the link to Victoria station.”
While Ask and Muse are intent on delivering perhaps 600,000 sq ft of speculative offices at three untested sites during the next five years, some agents are unconvinced that such levels of development are merited – especially given uncertain demand and an already bulging pipeline.
“The average take-up of grade A space over the past three years was about 250,000 pa. But there’s the best part of 850,000 sq ft of grade A space being completed this year, and a further 450,000 next year,” says David Thwaites, associate director at Lambert Smith Hampton.
That means the equivalent of around five years’ grade-A office supply will be launched on the central Manchester market within the next two years. Thwaites believes the city needs a significant burst of inward investment to justify the amount of new space being planned.
“We had the Bank of New York deal in 2004 but, since then, there has been nothing comparable,” he says. “Professional occupiers, such as lawyer Halliwells, are moving around, but that leaves a gap elsewhere.”
Meanwhile, Michael Hawkins, director of WHR Property Consultants, is scathing about the high pace of development on fringe sites. “Everyone is trying to compress a 10 to 15-year development programme into three to five years,” he says. “Lots of developers are pursuing the same objective and it’s a financial impossibility for every scheme to be successful. It’s one thing having 10 years of growth in a benign economic environment, but if ever there was a time for more controlled development, it’s now,” he says.
Hawkins also questions whether occupiers will want the kind of space being delivered at Manchester’s emerging business locations.
“The problem is that every developer of grade A space thinks they’re a mini-Spinningfields. They’re not. Just because you put on a Man United replica shirt does not mean you’re Carlos Tevez.”
It could equally be argued, however, that it should be left to the market to decide which schemes prosper and which do not – and that talk of “controlled development” is misplaced.
It is possible that all the developments forming Manchester’s next generation of major schemes will prosper. During the past decade, thousands of jobs were created in the city centre and, at that rate, Central Spine, Greengate and Victoria will all have an important role to play in the city’s future. But such a prediction depends on market uncertainty turning out to be a temporary blip rather than a long-term nosedive.
Agents have their say on Manchester’s emerging business quarters
Opinion varies as to which of the major schemes is likely to do best. Tony Bray, head of Cushman & Wakefield’s Manchester office, says: “Greengate, because it’s so close to the prime retail core, and to Victoria station, ticks all the boxes. Muse’s scheme is a little more distant from the retailing, but is also a strong site.”
Peter Skelton, head of Lambert Smith Hampton in the city, is also a fan of the northern gateway.
“The area around Victoria will be the part of Manchester that will see the greatest change, and will benefit from the new Metrolink routes to Rochdale and Oldham,” he says.
On the other hand, Patrick Joynson, director at Savills, which advises Ask, believes Central Spine offers its own advantages. “This is the next business quarter for Manchester,” he says.
“This kind of product isn’t on offer elsewhere, and the focus will be on retaining and recruiting staff. The whole purpose of the scheme is to make sure employees have a fantastic experience.”
