Manchester Offices and the Tech Sector

Knight Frank has recently published a report on Manchester’s  office market and the impact of the technology sector.

The consultant says that the city has evolved a significant tech market. Take-up within the Manchester market over the last five years (2013-17) shows that there were some 144 leasing transactions from occupiers within the IT & Telecoms sector. These deals accounted for more than 770,000 sq ft of office space – that is a volume of space greater than total 2017 take-up across all sectors in 6 of the 10 regional centres that Knight Frank monitor.

Notable transactions include: Amazon, Bet 365, Booking.com and Jaguar Land Rover, Recent research from Tech Nation, reveals that there are in excess of 30,000 digital jobs within the Manchester economy – which on generous space allocations of 1:8 is the equivalent to some 2.5 million sq ft of office space. These firms have a turnover of some £3.2bn – so they are significant contributors to the local and regional economy. The research also shows that Manchester has a vibrant digital eco-system which led to the birth of more than 450 new digital businesses in 2016. When those businesses are formed they have great growth prospects.

A third of Tech Nation’s Northern Tech 100 – that is the fastest growing tech companies in the North of England – are based in Manchester and have an average growth rate of 49% per annum. Four of the companies found on the list have recently let or acquired a total of 80,000 sq ft with a further 17,500 sq ft under offer at the time of writing.

Knight Frank are also aware of active requirements totalling around 100,000 sq ft from companies within the list. Microsoft, for example, have recently taken 100 desks within Bruntwood’s Neo Building
while both Amazon and Alphabet have a small presence in the city.

Over the same 5 year period there were 406 leasing transactions from companies across the 5 tech sub-sectors. They absorbed 1.4 million sq ft of office space over this time.

Knight Frank conclude that as Amazon and the like invest in the healthcare and insurance sectors, for example, the market will see space solutions that were not so long ago regarded as the exclusive domain of a few select, fast-growth tech companies becoming a reality for the many.

Metropolis Research is monitoring around 20 requirements in the Manchester market and 80 potential movers. Some 20% of companies are in the technology sector.

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Technology Companies and Offices

CBRE has recently published its ‘Tech Cities’ report looking at  office leasing patterns in the technology sector across Europe.

Conclusions include:

Technology companies still dominate tech activity across Europe in real estate terms – 65% of all deals tracked fall under software, IT services, telecom or hardware;

The e-commerce sub-sector accounts for the largest average deal size of leasing transactions, which reflects the aggressive growth of the sector across industries. Berlin for instance has attracted larger
e-commerce floorplates than anywhere else in Europe along with London, Dublin and Amsterdam;

While new tech companies make up a smaller proportion of total deals than traditional sub-sectors, they are just as space-hungry as the more traditional companies in terms of average deal size. This reflects differences in growth speeds of companies within each of these two categories in the global marketplace, with the new tech sector seeing particularly rapid growth;

Depending on the tech sub-sector and business strategy, occupiers will be able to agglomerate with peers within the same sub-sector, or identify a different sub-sector that offer benefits of a close location, with London, Reading, Bristol and Cambridge as examples;

London is CBRE’s top-ranking technology cluster. The city is a magnet for young technology talent, and employment in the tech sector has grown by 20% since 2008. Major employers in the IT services sub-sector include Capgemini & Cognizant; the largest employers in the software sub-sector include Microsoft and Oracle and in telecoms the city is home to major operations for BT & Vodafone. Other top employers of tech talent in London include Accenture, IBM, and Thomson Reuters;

The Thames Valley region is one of the most established technology clusters in Europe. The Thames Valley is dominated by very large organisations which make up more than 62% of employment. Telecoms, IT services and software are the dominant sub-sectors in the cluster with major employers being largely global tech companies including Vodafone, Huawei, Telefonica, Microsoft, Oracle and Hewlett Packard. Oracle, Cisco and Microsoft are major employers of development talent in the Thames Valley region with Visa and Sky also having large operations in the cluster;

Bristol is one of the major regional centres for tech outside of London and the Thames Valley with employment in the sector growing by 25% since 2008. Bristol is a major centre for the telecoms industry with EE, BT, Nokia, Orange and Vodafone all having a presence in the city. Other major employers of tech talent include Lloyds Banking, IBM and Hewlett Packard. Bristol is also home to IT service companies Softcat plc and Civica.

CBRE say that understanding underlying demand conditions using this framework helps inform potential future office transaction strategies.

Metropolis is currently tracking around 150 IT, technology and telecom companies searching for offices across the UK.

 

Top 10 London Business Sectors in 2013

Banking & Finance leads the way

Banking and finance leads dominate the London business sector top ten for the fifth year running. The largest office requirements emerging from this sector are focused on the London EC2 postcode area.

Top 10 London Business Sectors

 

 

 

Similar to the UK picture, Technology, Media and Telecoms (TMT)  sectors make up a sizable portion of the top ten in London (33.5%). The largest relocation and refurbishment projects in this sector are focused on London N1 and SE1.

Law and Insurance sector leads saw an increase on 2012 numbers. Unsurprisingly law sector relocation activity centers on London EC4 postcodes, although there was also significant demand for new space in London EC2. Insurance sector office demand centered on London EC3, with close to 700,000 sq ft of space required in this postcode last year.

London office deals reached 12.2m sq ft in 2013, up 37% on 2012’s result. According to our research, over 450 requirements for new space in London were active in the last six months and over 1,300 occupier lease expiries are due in the next two years. We expect to see office demand in London grow further this year, buoyed by improving economic conditions.  There is currently close to 7m sq ft of office space under construction in central London expected to be delivered before the end of 2014.

 

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Metropolis 2013 Research Review

REQUIREMENTS BOOST

The Metropolis research team produced a total of 6,537 relocation, construction and refurbishment leads in 2013. Over 26% of these were active UK office space requirements, in line with 2012 research results. 1,745 office requirements were confirmed in total, with 1,056 new office requirements uncovered by our research, up 6% on 2012’s total and 19% on 2011’s.New requirements accounted for over 22m sq ft of UK office demand.

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61% of Metropolis leads were projects located in the South of the UK (63% in 2012, 61% in 2011, 2010 and 62% in 2009), with 39% of lead projects located in Wales, the Midlands, North, Scotland and Northern Ireland. Greater London projects represented 45% of the 2013 lead total, a close match to the 2012 proportion (46%).  

Leads in Scotland saw a 120% increase when compared to 2012’s lead total, boosted in part by energy sector requirements in Aberdeen and an upturn in the Glasgow office market. West Midlands lead numbers saw an increase for the second year running, with several new Birmingham office requirements emerging from the law and insurance sectors. Results for other Northern  regions were broadly in line with expectations, with North West lead numbers slightly down on last year’s result but still up on 2011, 2010 and 2009’s totals.

London and South East lead numbers were very similar to 2012’s totals.  In terms of Greater London office requirements, the top 5 most sought after postcodes areas by demand were:  EC2 (3.6m sq ft),  W1 (3.2m sq ft),  EC4 (3m sq ft), SE1 (2.7m sq ft) and EC3 (2m sq ft).

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UK LEADS BY PROJECT SIZE – 53% of Metropolis leads in 2013  reported on projects over 10,000 sq ft. 46% of leads were made up of projects between 5,000 sq ft and 30,000 sq ft. 73% of leads covered projects over 5,000 sq ft.  The increase in lead projects between 2,000 sq ft and 4,999 sq ft can be attributed to the number of SME’s facing 2013 and 2014 lease ends and those launching searches for additional and larger space as market conditions improve.

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TOP TEN BUSINESS SECTORS – The Technology & Telecoms sector overtook Banking & Finance in 2013 as the strongest UK business sector in terms of relocation and refurbishment projects.   Lead numbers within this sector have grown year on year since 2009, making up 11% of all leads researched last year. If coupled with the Media sector under the popular designation of ‘TMT’, these two sectors were responsible for 32% of the top ten. The largest new technology office requirements were centered on London and the Thames Valley, with a few notable new searches emerging in Cambridge and Edinburgh.

The Banking & Finance sector was pushed into second place last year, but still had a strong showing, on par with 2012 lead levels. Relocation and refurbishment leads on hedge funds and investment firms made up 33% of the sector total. 

Law firm leads saw a 23.5% increase when compared to 2012 lead numbers and we expect increased activity in this sector during 2014. The recently published Metropolis Law Report confirms we are tracking 140 active  law firm office requirements totaling 2.6m sq ft plus over 100 law firms with lease expiries or breaks coming up between 2014 and 2016.

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(C) Metropolis Property Research Ltd 2014