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The Lights Will Not Go Out: Manchester's Never-Ending Boom

Late cycle, a market past its peak? Fears that the lights might go out on Manchester's three-year-old development boom can be dissmissed, according to new data from Deloitte.

Even so, analysts issue an amber warning for the city's booming residential sector. Bisnow makes sense of the numbers.

Manchester after dark night towers lights windows
Manchester after dark: the view from Piccadilly Station, platform 14

"How much longer can it go on?" These words, or versions of them, crop up in almost every conversation about Manchester's booming property market.

Until now the answer has usually been a shrug, a (sometimes) convincing assertion that Manchester has entered a virtuous cycle of sustainable growth, and a brisk change of subject.

Now, after a year in which the how-much-longer question was asked more often than ever, we have some answers. The latest data on Manchester’s development pipeline blows the idea that developers and funders are preparing to turn off the tap out of the water.

Deloitte’s Manchester Crane Survey shows that more than 2.1M SF of speculative office floorspace is under construction, with 25% already pre-let. This compares with 10% pre-let and 1.5M SF under construction in January 2018.

The data comes just weeks after the city recorded sky-high 1.7M SF office take-up in 2018.

Meanwhile the residential sector, flagged by some as a potential cause for concern, shows no sign of slowing. The number of residential units delivered is at its highest level since 2006.

A total 14,480 residential units were reported to be under construction in 2018, according to Deloitte, representing an increase of 30% on 2017 and double that of 2016.

During 2018 a total of 2,569 residential units were completed. The pipeline of data points towards 2020 having the highest rate of delivery since the Crane Survey began in 1999.

These include some monster schemes like Elizabeth Tower and the Crown (664 units) and Embankment West (503 units).

The Lights Will Not Go Out: Manchester's Never-Ending Boom

“One or two people might have expected to see the upward trajectory of development drop off as we ended 2018, but that hasn’t happened," Deloitte Real Estate partner Simon Bedford said. "We’ve more on-site than last year, and more in the pipeline in the office sector, and we’ve not yet reached the peak.

“This is not late cycle; I’m a little hesitant saying that because it felt like the top of the cycle in 2018, but the pipeline doesn’t bear that out. Where you would expect it to reduce in the year ahead, it hasn’t. Maybe the best way to put it is that we’re at the top of the cycle, but that we’ve moved the dial in Manchester, so that it is now becoming a sustainable long-term success story.”

Bedford points to a long-anticipated structural change that is now having real-world effects: the rocketing city centre residential population.

“It’s a game changer. It makes such a difference to the sustainability of anything in the city centre,” he said.

Bedford suggested that if you want to spot the tensions and limits of the Manchester market, look at the residential pipeline, the student housing pipeline and hotels. And look closely at retail and leisure, which he says is one of the under-the-radar success stories.

Manchester apartment partnership between Uber and Moda Living

1. Residential Pipeline

The rate of growth is eye-popping. The anticipated level of residential delivery over the next three years is due to exceed the previous 10 years combined. Completions in 2019 are projected to exceed 5,500 units before rising above 7,500 in 2020, with 2021 contributing a more normal 1,000 units. This compares with completions totalling 2,569 in 2018. Or to put this another way, you ain't seen nothing yet.

2. Student Housing

This is an on-off-on again market, and it is currently on in a big way. In the 10 years from 2007-2017 only four years — 2007, 2012, 2014 and 2017 saw any development at all. But the city council took a new look at the figures, and the cycle restarted.

Vita has started on their second Circle Square site. And work on two tall buildings has commenced; Unite Student’s New Wakefield scheme and Downing Student’s River Street scheme. Together these schemes will deliver 1,794 new bedspaces.

3. Retail and Leisure

Contrary to popular reports, the retail and leisure development scene is not dead. Instead, it has become fragmented and small-scale and therefore largely escapes the big data-trawling operations. According to Bedford, this is a mistake.

"There's lots of retail and leisure activity, lots of new developments, it is just mostly on the ground floor of other buildings and that means a lot of small units which in turn means activity gets understated," Bedford said.

The most conspicuous element of the leisure sector, hotel development, shows no sign of slowing despite growing talk among hotel managers of over-supply, and evidence of a slowing in room-rate growth.

The number of new hotel rooms currently under construction in the city has reached a record level, with 2,129 new bedspaces in the delivery pipeline. Compared to 2018 figures, this is an uplift of more than 900 bedspaces, and 1,300 more than the average annual construction rate since 2008.