Manchester Needs To Drive Rents And Keep Students To Build On Global Brand

Manchester’s growing student population and the city’s globally recognised brand have provided the city with strong fundamentals to become a northern powerhouse — but office investors need to be convinced that available returns match higher construction costs.

As the city pushes to retain its students after their studies and to attract more businesses to relocate from London, finding ways to drive rental growth and create a city that people can work, live and play in are crucial to Manchester’s longer-term prospects, attendees at Bisnow’s Manchester Real Estate Outlook 2025 event heard.

“You know, we keep talking about rents, getting to the £50s per SF, getting beyond that,” Schroders Capital Head of Manchester Philip Scott said.

“From a viability perspective, most investors would say that their new office development starts at £50. It needs to be closer to the mid-£50s or even £60s,” he said. 

While any new supply coming through is achieving record rents, those record rents are still lower than where they need to be to unlock the wider development pipeline, Scott said.

“Notwithstanding the fact that land is very tight in Manchester, if you've got no new supply, how do you continue to demonstrate that rental growth? It’s really quite challenging.”

For the past 10 years, the strategy of the local council and the government has been to bring people back into the city centre, Select Property CEO Adam Price said.

About 170,000 new homes are needed in Manchester by 2038, with 70,000 under construction or in the pipeline — evidence that the city is growing. 

Price attributed that growth to education, commercial development and culture, as Manchester is home to five universities, not including those in Salford and Bolton.

“As of last year, 104,000 students signed up to study in Manchester, with a 51% graduate retention rate, which is second only to London,” he said. “You can see we've got a large pool of talented young professionals who all need somewhere to live.

“On the commercial side, there's a trend that businesses are relocating from London to Manchester to capitalise on more affordable conditions.”

Among those are Puma, Auto Trader and Havas, the government's Manchester Digital Campus, plus the proposed stadium and regeneration project around Manchester United’s Old Trafford ground.

“Manchester is in a really strong place, and from a cultural perspective, it's been voted as one of the most exciting cities in Europe,” Price said. “Soho House is in the pipeline, the Brit Awards are coming from London, and all these things, with the music, the football, the fashion, the history, make Manchester a really popular place.”

Although the prices are going higher, London will always be attractive as the capital, but Manchester is now the capital of the north and, along with Birmingham, is showing strong signs of returns, Price said.

CBRE Head of Northern Occupier Services Frankie Isherwood also said Manchester’s transport links had created a mix of affordability for workers to live in the city centre or within an easy 45-minute commute, given the tram network. 

“That's really important. Occupiers are focusing on amenity, and we're seeing a vast array of amenity coming forward in offices,” she said. “We're seeing developers and investors really trying to work out their USP.”

She said there had been 320K SF of takeup of commercial space in the first quarter, the highest Q1 total since before the pandemic, with Grade A accounting for a higher proportion of volumes, while the flex market had also grown.

“Investors and developers are really thinking about how that stack is going to work,” she said. “You're able to cater for startups, two-, three-person offices, some small suite schemes and then big floor plates. You're able to really take that kind of company through the journey.”

That high number of students needs to be accommodated, and Fusion Group Commercial Director Laura Kurt said the company had a planning application going through for a 40-storey tower on Whitworth Street, which it hoped to deliver in 2030.

“From a student perspective, it's a fantastic city institutionally, and we're definitely seeing that growth pipeline for both international students and also domestic students that establishes Manchester as a destination for young people, not only to study but also then to have a career afterwards and stay longer,” Kurt said.

“One of the things I think that's a real opportunity for all of us as developers is to encourage that retention. Glasgow does that incredibly well. It's definitely something that Manchester, with its coliving and BTR, means we've got a really great opportunity to stabilise.”

One of the biggest risks and concerns is the international student growth pipeline and the threat for student accommodation, Kurt said.

Looking at the office market, MEPC Development Director Dan Hyde highlighted occupiers as driving the attraction and retention of talent, plus the emergence of city centre neighbourhoods. 

“Manchester is now gravitating into neighbourhoods, creating their own microclimates. I think that's what really makes it quite a special investment opportunity,” he said.

Glenbrook Property Development Director Sunny Johal also highlighted the investment appeal of Manchester’s cool factor.

“You get a vibe that is almost circulating in the air within Manchester,” he said. “And you go to the places like, say, Birmingham or Milton Keynes or even Bristol, and it's just not there. That builds confidence from investors across the board, also underpinned by a very bold and supportive local authority.

“We are still seeing investor appetite to transact. I think that's increasing and we'll see more of that towards the end of this year.”